The U.S. announced a 20% trade tariff on Taiwan on the 1st, but the technology industry is waiting for the upcoming announcement of the 'Section 232' investigation, which may impose additional semiconductor taxes, to truly determine whether they will suffer significant losses. (Background: The U.S. imposes a 20% tariff on Taiwan, higher than Japan and South Korea! Lai Ching-te emphasizes it is temporary; the Taiwanese stock market declines amid industry pressure and analysis of negotiation prospects) (Context: The U.S. reaches into offshore exchanges: taxpayers must declare 'overseas account encrypted assets') At TSMC's headquarters in Hsinchu and in the boardroom of Electronic Five Brothers in Taipei's Neihu Technology Park, everyone is holding their breath, waiting for a report that is about to come from Washington, D.C. The content of this report could trigger a seismic shift in the global technology supply chain, with Taiwan at the epicenter. Why did the U.S. initially announce a 20% tariff on Taiwan, yet the tech industry is waiting for 'Section 223'? This section, commonly referred to as the semiconductor tax, originates from a U.S. trade law that is over sixty years old, known as the Trade Expansion Act of 1962, Section 232. Why has this seemingly outdated law become the most important industry in Taiwan and the most dreaded black swan for the global tech industry? Section 232: The Trade Weapon of the U.S. President To understand the power of Section 232, one can imagine it as a long-dormant yet incredibly powerful 'family heirloom sword' in the U.S. president's trade arsenal. This sword originates from the Cold War era between the U.S. and the Soviet Union, granting the president unique powers: if any imported product is deemed a threat to 'U.S. national security', the president can bypass the lengthy legislative process of Congress and the framework of the World Trade Organization (WTO), unilaterally and swiftly implement trade restrictions, such as imposing tariffs or quotas. The process to activate this sword is both rapid and forceful; investigations can be initiated by industry requests, government agencies, or by the Secretary of Commerce himself. Once activated, the Department of Commerce must complete the investigation and submit a report to the president within 270 days; the president then has 90 days to decide whether to accept the recommendations and take action. This '270+90 days' timeline brings significant uncertainty to the market. The core power of Section 232 lies in the virtually limitless expansion of the definition of U.S. national security. Initially, its legislative spirit aimed to ensure the uninterrupted supply of materials needed for U.S. defense industries, such as tanks and airplanes. However, in recent years, its definition has been greatly expanded to cover 'national economic welfare' and even to protect domestic industries from unfair foreign competition. This means that Section 232 has effectively become a blank check for geopolitical maneuvering. The U.S. can repackage any economic dependency on foreign supply chains as a 'national security threat'. This allows the U.S. to bypass WTO's time-consuming dispute resolution mechanisms and swiftly gain absolute dominance in trade negotiations. Now, this sword is pointed at Taiwan's semiconductor industry. A History Written in Steel In 2018, the Trump administration invoked Section 232 to impose tariffs of 25% and 10% on imported steel and aluminum, respectively, catapulting this law from obscure legal text to global headline news. This incident offers two key lessons: First, exemptions are political bargaining chips, not permanent shields. Initially, key allies like Canada, Mexico, and the European Union received tariff exemptions. However, these exemptions were ultimately revoked or converted into restrictive quotas. This proves that diplomatic relations and ally status cannot guarantee permanent immunity under Section 232. For Taiwan, this is a severe warning: even if TSMC makes significant investments in the U.S., any exemption will result from negotiations and may be temporary. Second, the scope of tariffs will expand. The steel and aluminum tariffs initially targeted raw materials but later expanded to include 'derivative products' that use these materials, such as steel nails and aluminum wire. This precedent is crucial as it lays the groundwork for the potential scope of the current semiconductor investigation. The economic consequences of the steel and aluminum tariffs are a double-edged sword. While it protected U.S. steel mills, it severely harmed downstream industries that use steel and aluminum, such as automotive, construction, and even beverage can manufacturers. Why has semiconductors become the new battlefield? On April 1, 2025, the U.S. Department of Commerce officially initiated a Section 232 investigation into semiconductors and related products. The scope of this investigation is unprecedented. It covers various chips from mature processes to advanced processes, as well as semiconductor manufacturing equipment (SME) and, most critically, 'derivative products' containing semiconductors. The documents soliciting public opinion from the U.S. Department of Commerce reveal Washington's greatest concerns: Supply chain over-concentration: The report explicitly points out that 'U.S. semiconductor imports are concentrated in a few manufacturing facilities,' undoubtedly referring to TSMC in Taiwan. Foreign government subsidies: 'The impact of foreign government subsidies and predatory trade practices,' primarily targeting China's industrial policy. Supply chain weaponization: 'The potential for foreign entities to weaponize their control over the semiconductor supply chain.' Among these, the 'derivative products' clause is a hidden landmine for Taiwan's entire tech ecosystem. According to analyses from the National Development Council, this could impact major Taiwanese exports such as servers, graphics cards, and network switches. This means that the impact of the Section 232 investigation will extend far beyond TSMC and UMC to potentially threaten the entire electronics outsourcing and brand industry chain, including Quanta, Wistron, and Hon Hai. This clause, originally aimed at chips, could become a massive cannon targeting nearly 70% of Taiwan's exports to the U.S. Speculation: Three Scenarios for Taiwan's Tariffs Facing the imminent revelation of the Section 223 investigation results, Taiwan's tech industry may confront three distinctly different scenarios. Table 1: Structure of Products Exposed to the 232 Investigation for Taiwan's Exports Worst-case scenario: Comprehensive high tariffs (25% to 50%) In this scenario, the U.S. imposes indiscriminate high tariffs on all imported semiconductors and related products. This would be a devastating blow to Taiwan, directly eroding corporate profits and forcing manufacturers to make painful choices between 'absorbing costs themselves' and 'passing them on to American clients like Apple and Nvidia', ultimately undermining the global competitiveness of Taiwanese products. Targeting mature processes This is a more sophisticated strategy. The U.S. may impose high tariffs on mature process chips of 28nm and above, while granting exemptions or lower tax rates for advanced process chips of 7nm and below. This scenario reflects the U.S.'s dual objectives: to counter China while managing dependency on Taiwan. The U.S. is well aware that Taiwan (especially TSMC) holds an irreplaceable position in the advanced process field, which is the heart driving the U.S. AI and high-performance computing industries. At the same time, the U.S. is concerned about China's rapid expansion in the mature process field and its national subsidies, as these chips are widely used in automotive, industrial, and defense sectors. Therefore, by precisely targeting mature processes, the U.S. can simultaneously curb its greatest strategic competitor, China, while ensuring that its most critical advanced technology supply chains remain undisturbed. In this scenario, TSMC's advanced process business might be spared, but Taiwanese manufacturers like UMC and Powerchip, which primarily focus on mature processes, will face immense pressure. Negotiated concessions in exchange for threats In this most likely scenario, the threat of Section 232 becomes the most powerful bargaining leverage for the U.S., with the final outcome not being simply tariffs, but a complex agreement. Taiwan's bargaining chips are very clear: The irreplaceability of technology: TSMC holds an overwhelming market share in the global foundry market, especially in advanced processes. The sincerity of investment in the U.S.: TSMC's massive investment in Arizona is a concrete response to U.S. industrial policy. There may also be undisclosed details of U.S.-Taiwan trade negotiations regarding this investment. The value of a strategic partnership: Taiwan collaborates with the U.S....