Taiwan-US Ties Are Becoming a Political Headache for the Lai Administration

The Diplomat

a day ago

Supporters hold up the flags of Taiwan and the U.S. as they welcome President Lai Ching-te (not pictured) upon his arrival at the Honolulu airport during a transit of Hawai'i, Dec. 1, 2024.
Late July brought a series of setbacks for the Lai administration of Taiwan. After the disastrous failure of the first round of recall votes of the 'Great Recall Movement' on July 26, the Trump administration in the United States imposed 20 percent tariffs on Taiwan, part of a wider announcement of tariffs on major trading partners. More unusually, a planned trip by President Lai Ching-te that would have involved a stopover in the United States was canceled, reportedly because the Trump administration did not want to upset China as the two side pursue trade negotiations.
The Lai administration probably had hoped for a different series of events to buoy its July and August: successes in terms of Taiwan-U.S. diplomacy that could carry the Lai administration through the recall season (the second round of recall voting is scheduled for late August). But its vision was not to be.
In U.S. President Donald Trump's initial 'Liberation Day' tariff announcement in early April, Taiwan was hit with 32 percent tariffs. This led to strong reactions in Taiwan, particularly as this was only slightly lower than China's tariff rate of 34 percent. Trump later announced a 'pause' on the higher tariff rates, inviting governments from around the world to negotiate deals. Taiwan was one of many seeking to lower the tariff rate through talks with Washington.
Ahead of the voting date for the recall, however, rumors arose that the United States would continue with its plans for a 32 percent tariff rate on Taiwan. The claims continued to circulate online, even though they were denied by the American Institute in Taiwan (AIT), which functions as a de facto U.S. embassy in Taiwan in the absence of official diplomatic ties. AIT stressed that news on tariff rates would come through official channels.
The online rumors implied that the Lai administration had had no success in convincing the United States to reduce the tariff rate. The claims were picked up by Kuomintang (KMT) politicians, such as pan-Blue commentator Jaw Shaw-kong, who also served as the KMT's vice presidential candidate in 2024 elections, and KMT party chair Eric Chu.
Contrastingly, Lai administration trade officials stated that Taiwan expected to see a tariff rate that was below 25 percent, in line with what Japan and South Korea received. Lai administration officials also denied allegations from KMT legislator Chang Chia-chun that Taiwan had already been informed of a tariff rate but was seeking to keep it secret ahead of the recall.
The Lai administration appeared to hope that it could tout a preferential tariff rate as a political victory, potentially influencing the recall vote. Vice Premier Cheng Li-chiun was dispatched to the United States for four rounds of trade talks. An op-ed in Bloomberg published by Lai in April, suggesting that the United States and Taiwan should deepen economic connections for greater prosperity was also seen as an attempt to convince Washington to lower tariffs.
The choice of Cheng for trade negotiations is notable. Cheng, who previously served as minister of culture under the Tsai administration, is considered a Lai loyalist. She was previously considered a contender against Hsiao Bi-khim, best-known as Taiwan's representative to the U.S. during the Tsai administration, as Lai's vice presidential candidate. It is possible that in the event of a future cabinet reshuffle, Cheng will become the next premier.
Ultimately, the Lai administration did not see tariff rates for Taiwan announced ahead of the July 26 recall vote, even though it touted that it was near closing a deal. And when the rate was announced, Taiwan's 20 percent tariffs were higher than the rates imposed on Japan and South Korea – both at 15 percent. Taiwan's tariff rate is also higher than Southeast Asian economies such as Cambodia and Thailand, which both received 19 percent. This was a blow to the Lai administration.
The Taiwanese public is mostly focused on the numbers and appears unconvinced that 20 percent was the best that could be secured while still protecting Taiwanese industries. U.S. trade negotiators were reportedly placing significant pressure on Taiwan to make further concessions. To this extent, there has been relatively little discussion in Taiwan of what Japan and South Korea offered to receive lower tariff rates – for example, Trump's claims that Japan would directly pay the U.S. funds to be used for investment at the discretion of the Trump administration – or other uncertainties about tariff negotiations. Most reporting has focused on the percentage of tariffs that Taiwan would receive.
As pan-Blue figures accuse the government of failing in its trade negotiations, the pan-Green camp has sought to recenter political attacks on the pan-Blue politicians who claimed on the basis of mysterious inside sources that Taiwan would have a 32 percent tariff rate. The Lai administration has also sought to emphasize that trade talks with the United States are ongoing, and that Taiwan may see a further reduction in tariff rates.
The KMT is demanding that the Lai administration clarify what it means by saying that trade negotiations are ongoing. The KMT has also alleged that trade negotiations are lacking in transparency and should be disclosed to the public, though the party's leaders probably knows well that it is standard practice for such trade negotiations to be kept secret.
The KMT is currently calling for a national conference to be held on the tariffs. There is a rare opportunity for bipartisan cooperation if both the KMT and the Democratic Progressive Party (DPP) agree to pass special funding to deal with the economic impact of the tariffs. But the KMT may simply use the national conference as a political opportunity to attack the Lai administration, perhaps through interrogating DPP politicians, or attack the Executive Yuan's proposed budget as failing to do enough for affected industries. This has generally been the pattern in the last two years, with the KMT staging public walkouts during reports to the legislature by Premier Cho Jung-tai, after calling for Cho to make such reports. There is also a recurring pattern of one-upmanship between the KMT and DPP legislative caucuses when it comes to relief funding for disasters.
Amid accusations of 'failed' trade talks with Washington, there came another blow to the Lai administration. In late July, reports began to appear in the international press that Lai's planned August stopover in New York was off. The Lai administration and U.S. State Department denied the veracity of such reports, with the Ministry of Foreign Affairs pointing out that no trip had been formally announced, so it couldn't have been canceled. However, it was known that Lai had planned to visit Belize, Guatemala, and Paraguay, Taiwan's diplomatic allies in South America. The Guatemalan government later claimed that the trip was off due to the impact of typhoons on Taiwan.
Taiwanese presidents cannot pay formal visits to the United States, due to the lack of formal diplomatic ties. However, it's long been standard practice for them to make 'stopovers' – essentially transiting through major U.S. cities en route to visit Taiwan's diplomatic allies. China vociferously protests every such transit by a Taiwanese president, something the U.S. government has always ignored – until now.
Among those to criticize the Trump administration for reportedly rejecting Lai's stopover request was former U.S. Speaker of the House Nancy Pelosi, who traveled to Taiwan in August 2022. Pelosi, as well as others, have criticized the Trump administration for the optics of throwing Taiwan under the bus in order to please China. The underlying suggestion would be that the Taiwan-U.S. relationship is up for negotiation.
The shock of U.S. tariffs and the cancellation of the Lai administration's planned stopover is likely to amplify skepticism about whether the United States will support Taiwan in the event of a Chinese invasion. What has been termed 'U.S.-skeptic rhetoric' has been on the rise in Taiwan in past years, as embraced by pan-Blue politicians such as Jaw and others.
The cancellation of Lai's trip is a slap in the face, given that past Taiwanese presidents have been allowed to transit in the United States. The importance of the stopover visit can be seen through the fact that the entire trip was cancelled when a U.S. transit was not possible. Yet there is opportunity to remedy this if the trip is later rescheduled. Even Pelosi's visit to Taiwan was called off once, due to the then-House speaker contracting COVID-19. That raised questions about whether the trip would actually occur – and it eventually did.
That being said, the impact of the tariffs may turn out to have a larger impact for the Lai administration, particularly as midterm elections approach. As agriculture and industry feel the heat, the Lai administration will be under pressure to not only come up with relief measures but also manage the Taiwan-U.S. relationship – otherwise it will again face punishment at the polls.