Tariffs Are High, But We Can't Afford to Move
A Taiwanese Manufacturer's Perspective on Tariff War
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After seeing the tariff news, I immediately asked manufacturing contacts in Taiwan, "Would you plan to move your factories to America?" They responded with a solid no without hesitation. Long before the tariff war, they had done the calculations.
Taiwan's manufacturing landscape: More than just semiconductors
When people think of Taiwan manufacturing, they often focus exclusively on TSMC and the semiconductor industry. But the reality is much richer. Taiwan has factories that produce precision bicycle components used by top global brands. Giant, the largest bicycle brand, is based in Taiwan too. Taiwan produces automotive parts for Japanese and European vehicles, specialized medical equipment components, and advanced materials for consumer electronics. Overall, Taiwan provides the world with hardware for various industries and forms the backbone of manufacturing for most consumer products that include metal components and semiconductors.
These businesses represent Taiwan's manufacturing sector, which accounts for an impressive 35% of GDP—the highest share among comparable economic activities. Many of Taiwan's manufacturers aren't just factories; most are multi-generational family businesses with deep local roots and specialized knowledge.
Cost of “Made in USA”
"You have no idea how the numbers actually work out," a precision components factory owner told me. "Americans look at the tariff and think that's the only calculation we need to make."
The most obvious obstacle to relocating is the cost differential, which extends far beyond just labor expenses. While it's true that "in China, labor wages can be one-third to one-quarter of the cost [compared to the US]," labor costs in Taiwan, though higher than China, remain significantly lower than in America. For a medium-sized factory with 100 workers, the labor cost difference alone would add millions to annual operating expenses.
But TSMC is moving their factories to the US, isn't it? First, TSMC is a top 10 company in the world by market cap. Their profit margin is a whopping 40%. In comparison, other non-semiconductor manufacturers already have very thin profit margins (less than 10%). If they add the labor cost differential, they could end up with no profit even if they save on shipping costs. Building a factory in the US costs far more than in Taiwan, with nearly double the construction time due to stricter regulations and higher construction costs. The land acquisition process alone can take years to complete.
Next, it is just too expensive and unpredictable to set up factory plants in the US for these manufacturers. They often face longer lead times, communication challenges (even without a language barrier), and quality issues early in production.
“We Can’t Move Everybody”
Even if a manufacturer is willing to move to the US, they cannot bring all their suppliers with them. It's not just about building a facility—it's about recreating an entire ecosystem. A recent CNBC Supply Chain Survey found that over half of respondents (57%) identified cost as the biggest obstacle to relocating supply chains to the US.
Taiwanese factories don't operate in isolation. Many facilities have hundreds of different suppliers within a 30-mile radius—everything from raw material processors to specialized tool makers, testing facilities, and logistics providers.
Manufacturing doesn't happen in a vacuum—these operations rely on a dense network of buyers, sub-suppliers, component manufacturers, and distributors that all contribute to the final product. Taiwan has developed specialized manufacturing clusters that function like finely-tuned ecosystems. These small and medium-sized manufacturers are dedicated, agile, innovative, and well-networked—a business culture similar to Germany, Japan, and Switzerland.
Take Taichung, for example. Its cycling industry component manufacturers collectively create nearly every part needed for high-end bicycles. From carbon fiber frames to specialized gears, chains, and braking systems—these companies all support each other while maintaining their own areas of expertise. The US imported over a quarter of a billion dollars in just bike parts from Taiwan last year, with Taiwanese manufacturers controlling over half the global market for critical components like derailleurs and brake parts.
Relocating would mean either bringing all these suppliers along (impossible) or finding new American partners (difficult and expensive).
Not Everyone Is TSMC
The consensus among factory owners is clear: wait and see. They’re holding off on big moves until the final tariff rules are clear. “We’re not TSMC with 30–40% margins—we can’t just move to the U.S.,” one joked. The truth is, building in America is expensive and slow. If tariffs eat up what little profit they have left, many will have no choice but to leave the U.S. market or start selling to other countries. It’s not ideal—but what can they do?
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