Four Strategic Errors in Lai Administration's U.S. Tariff Negotiations
The Storm Media Editorial, August 2, 2025
The failure of Taiwan and the United States to reach an agreement clearly means that Taiwan did not accept the demands of the United States, and those demands were undoubtedly very harsh. Therefore, to say that the imposition of a 20-percent tariff as a result of the failure to reach an agreement constitutes a “national humiliation” is premature; the facts still need to be observed and understood.
However, this does not mean that the administration of President Lai Ching-te responded appropriately to U.S. President Donald Trump’s tariff war. In fact, we can say that it was precisely the Lai administration’s misjudgment, inability to grasp the “enemy’s intentions,” and a series of wrong countermeasures that caused Taiwan to lose bargaining chips in negotiations with the United States, leading to this outcome.
There are four most serious mistakes: First, permitting the Taiwan Semiconductor Manufacturing Company (TSMC) to increase investment in the United States by $100 billion. Second, allowing the New Taiwan dollar (NTD) to appreciate by more than 10 percent. Third, a mistaken understanding of how to deal with Mr. Trump; Fourth, the entirely opaque, black-box operations from start to finish.
Everyone knows that Mr. Trump has been “determined” to bring manufacturing back to the United States in order to “Make America Great Again,” and semiconductors are the most critical part of this agenda. As a result, in March, the Taiwan Semiconductor Manufacturing Company (TSMC) went to the White House and announced with Mr. Trump that, in addition to the existing $65 billion investment, it would add another $100 billion to build more wafer fabs and introduce more advanced processes in the United States. Additionally, CPC Corporation’s commitment to invest $20 to $40 billion in Alaska’s natural gas pipeline project was also an extremely unwise early promise.
Furthermore, Mr. Trump has always believed that countries enjoying large trade surpluses with the United States are “currency manipulators” who deliberately suppress their exchange rates. While the Lai administration was sending delegations to negotiate in the United States, Taiwan’s central bank—based on unknown information or instructions—allowed the Taiwan dollar to appreciate sharply. At the beginning of the year, the exchange rate was around NT$33.4 to the U.S. dollar; by June and July, it frequently appeared in the NT$28 range, marking an appreciation of about 14 percent.
Although exchange rate fluctuations are also influenced by international dollar trends, the Taiwan dollar had the largest appreciation in the world—an utterly unnecessary waste of leverage.
Without these two major mistakes, Taiwan would have had two additional bargaining chips in negotiations with the United States: “TSMC investing another $100 billion in the United States” and “the NTD appreciating by more than 10 percent.” The Lai administration’s failure was rooted in a more fundamental misunderstanding: believing that proactively showing goodwill to Trump would exempt Taiwan from the calamity of a tariff war.
Even if not yet widely known among the public, it has long been recognized internationally that Mr. Trump bullies the weak and always “demands more.” After Taiwan proactively offered the TSMC investment and currency appreciation, the United States simply pocketed them and “counted them for nothing,” demanding more instead. The public can see that Mr. Trump always adds demands on top of whatever other countries have already promised—for example, when Japan committed $400 billion in investments, Mr. Trump immediately increased the demand to $550 billion.
Within the Lai administration, whether it was the Ministry of Economic Affairs directly responsible for tariffs and trade, or the National Security Council tasked with more critical national security matters—was there truly no one or no agency that diligently studied Trump? Abroad, many had already begun studying “Trumpology” as early as last year when his chances of winning were becoming apparent.
The Lai administration’s fourth major mistake was: conducting the entire process in a black box—and a “very successful” one at that. The public has absolutely no knowledge of the negotiation contents, American demands, or the reasons for the breakdown. Back when the Democratic Progressive Party (DPP) was in opposition, it frequently attacked the Kuomintang’s (KMT) cross-strait negotiations for “black-box operations,” even in the case of the Cross-Strait Agreement on Trade in Services, which had over a hundred public hearings. Yet during the press conference on Friday, when asked by the media, President Lai refused to disclose information, citing a “confidentiality agreement.”
From loudly criticizing others’ “black-box operations” in the past to the “super black box” under the Lai administration today, the irony is overwhelming.
But we must firmly tell President Lai: you are wrong, and egregiously so. International negotiations are of course not fully open and transparent, but unlike commercial negotiations which involve interests and thus require confidentiality clauses, the U.S.-Taiwan trade talks fall within the scope of public affairs. The government has both the responsibility and obligation to ensure that society, the public, and—more importantly—the Legislative Yuan are informed and aware of the situation. President Lai’s refusal to disclose information on the grounds of a “confidentiality clause” reveals a failure to understand the public policy nature of this matter.
In practical terms, because negotiations involve the rights and interests of the state, the public, and businesses, when the other party makes aggressive or unreasonable demands, appropriately disclosing information to gauge public reaction—or even to provoke public outrage—can in fact serve as a domestic backing for the government’s external negotiations.
Undoubtedly, the failure to reach an agreement in the U.S.-Taiwan tariff negotiations is due to the United States making excessive demands that even the Lai administration dared not accept. At such a critical moment, the government needs the support of the domestic public—even the opposition parties—to stand united in facing external pressure. But what is President Lai and his administration doing instead? They are pushing for large-scale recall campaigns, completely falling out with the opposition. After the major failure on July 26, rather than reflecting, President Lai ordered the entire party to fully support the August 23 recall effort.
While the “front line” of the U.S.-Taiwan tariff negotiations is ablaze, the Lai administration remains fixated on internal political infighting. With such leadership—such a government—how can anyone expect them to guide Taiwan safely through a tariff war? After committing three major mistakes, is the Lai administration prepared to continue down this wrong path, blindly and recklessly to the end?