The United States has imposed “forced labor” tariffs under Section 301 on 60 global economies. Taiwan successfully secured a preferential rate of 10% that does not stack with Most Favored Nation (MFN) duties, which is not only lower than the 12.5% levied on Japan and South Korea but also far more favorable than the rates applied to China and Vietnam. Taiwan’s Ministry of Economic Affairs (MOEA) released its industry impact assessment today (25th), highlighting that this marks the first time Taiwan’s tariff rate is lower than those of Japan and South Korea. Seven traditional industries, including machinery, machine tools, and hand tools, will gain a critical tariff advantage, presenting an opportunity to shift from defense to offense and capture a larger share of the U.S. market.<\/p>\n
However, the MOEA also acknowledged that this is only the first-phase tariff under the “forced labor” probe. The U.S. is still conducting a “structural overcapacity” investigation, meaning the final tariff rate remains uncertain. Whether the highly scrutinized semiconductor industry will be affected also depends on the outcome of that investigation.<\/p>\n
Taiwan’s 10% vs. Japan and South Korea’s 12.5%: Seven Traditional Industries See Order-Shift Opportunities<\/p>\n
According to an announcement by the U.S. Trade Representative (USTR), the Section 301 tariffs addressing forced labor issues officially took effect on July 24, U.S. Eastern Time. Among major economies, Taiwan and the European Union are in the most favorable tier, subject to a 10% rate without MFN stacking. Japan and South Korea face a 12.5% rate without MFN stacking, while countries like China, Vietnam, and Thailand are subject to a higher rate of 12.5% that stacks on top of MFN duties.<\/p>\n
An analysis by the MOEA’s Trade Investigation Committee indicates that the tariff gap will directly translate into end-price competitiveness, benefiting seven traditional industries:<\/p>\n
Machine Tools and Machinery: Taiwan’s 10% rate is, for the first time, lower than Japan’s 12.5% and South Korea’s 12.5%, providing a 2.5-percentage-point tariff advantage. The MOEA assesses that this will enhance Taiwan’s competitive position in the U.S. market, helping to attract shifted and new orders and expand its U.S. market footprint.
\nHand Tools, Plumbing Hardware, and Bicycles: Taiwan’s 10% rate offers a significant price advantage compared to China’s 40.1% to 43.1% and Vietnam’s 15.1% to 18.1%, potentially boosting gross margins and expanding export opportunities to the U.S.
\nTextiles and Medical Devices: Taiwan’s 10% rate is also lower than China’s 40% to 46.2% and South Korea’s 12.5%, which is expected to further expand sales and market share in the U.S.
\nPlastic Products: Similarly, the lower tariff rate compared to major competitors provides potential for expanding into the U.S. market.<\/p>\n
1,909 Product Categories Exempted; Semiconductors Temporarily Unaffected<\/p>\n
Beyond the tariff advantage, the U.S. also announced a broad exemption list. The U.S. granted Taiwan a total of 1,909 exemption items for industrial products, meaning these goods will only be subject to the original MFN duties when exported to the U.S., without additional Section 301 tariffs. The exemption scope covers aircraft components such as radio navigation devices, communication instruments, and lithium-ion batteries, as well as fertilizers and light oil products.<\/p>\n
According to statistics, the value of these exempted items imported by the U.S. from Taiwan last year (2025) amounted to approximately $10.683 billion (about NT$345.7 billion). Among these, 1,817 items fall under global exemptions, while the U.S. granted Taiwan an additional 92 exclusive exemptions, including pig iron granules, industrial fatty alcohols, cork products, and wood products, which are expected to further enhance the competitiveness of related Taiwanese products in the U.S. market.<\/p>\n
Regarding the most closely watched semiconductors and major ICT products, the MOEA explicitly stated that these items are all on the published exemption list and are temporarily unaffected. Other products, such as steel, aluminum, copper, lumber, auto parts, and pharmaceuticals (patented drugs and their active pharmaceutical ingredients), are excluded from the Section 301 tariff scope because they are already subject to Section 232 tariffs.<\/p>\n
“Overcapacity” Investigation Pending; Uncertainty Remains for Semiconductors<\/p>\n
Although the first-phase outcome is relatively favorable for Taiwan, the alarm has not been completely lifted. The MOEA admitted that the currently announced Section 301 tariffs are only for the “forced labor” probe. The U.S. is still conducting a “structural overcapacity” investigation, after which a final tariff rate will be determined. An MOEA official stated: “It is still unknown whether the rate will be raised further. Under the terms of the U.S.-Taiwan Agreement on Reciprocal Trade (ART) signing, our rate would be 15% without MFN stacking.”<\/p>\n
However, the MOEA believes the “overcapacity” investigation should not apply to Taiwan’s semiconductor industry, primarily because current demand for AI and servers far exceeds supply. Taiwan’s export situation is characterized by insufficient capacity, not overcapacity.<\/p>\n
Chang Chien-yi, President of the Taiwan Institute of Economic Research (TIER), shared a similar view, stating that the current outcome is “favorable for Taiwan,” especially for traditional industries. Regarding the subsequent overcapacity investigation, Liu Pei-chen, Director of TIER’s Industry and Economics Database, analyzed that the investigation results could be released by the end of July but will have a limited impact on Taiwan’s domestic semiconductor industry.<\/p>\n
Liu analyzed semiconductors by separating advanced and mature processes. She pointed out that advanced processes are more closely linked to Section 232 tariffs and are very minimally affected by Section 301. Mature processes are more relevant to the overcapacity issue. However, she further explained that although there is an overcapacity problem in mature semiconductor processes, the industry has been actively responding. In recent years, domestic second-tier wafer foundries, concerned about a medium-to-long-term direct confrontation with China’s red supply chain, have successively initiated transformations, with many already riding the AI wave. Liu believes that as these companies transform, the substantive impact is continuously diminishing.<\/p>\n
Taiwan and U.S. Jointly Combat Forced Labor, Establish Supply Chain Governance Mechanism<\/p>\n
Beyond the tariff offensive and defensive maneuvers, the MOEA also stated that it will use the Foreign Trade Act as the legal basis to regulate the import of goods involving forced labor. In cooperation with the Ministry of Labor, it will jointly establish a mechanism to prevent goods linked to forced labor from entering the domestic market. The government will collaborate with the U.S. to promote enforcement, aligning with the global trade trend of ensuring international supply chains adhere to human rights, resilience, and sustainable governance, further strengthening the economic and trade trust and cooperation foundation between Taiwan and the U.S.<\/p>\n","protected":false},"excerpt":{"rendered":"The United States has imposed “forced labor” tariffs under Section 301 on 60 global economies. Taiwan successfully secured…\n","protected":false},"author":2,"featured_media":64364,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[174],"tags":[41648,191,189,41650,188,190,41649,9853,41651,2122,41647,41646,41645],"class_list":["post-64363","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-chang-chien-yi","tag-economy","tag-economy-of-japan","tag-forced-labor-section-301-investigation","tag-japans-economy","tag-japanese-economy","tag-liu-pei-chen","tag-machine-tools","tag-overcapacity-section-301-investigation","tag-semiconductors","tag-taiwan-institute-of-economic-research","tag-taiwans-ministry-of-economic-affairs","tag-u-s-trade-representative"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/posts\/64363","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/comments?post=64363"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/posts\/64363\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/media\/64364"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/media?parent=64363"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/categories?post=64363"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/tags?post=64363"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}