On 20 January 2025, Donald Trump was inaugurated for his second term as US president. He kicked off his presidency with a series of sweeping executive orders, some of which had key foreign policy implications. Among these decisions was the US withdrawal from the Paris Climate Agreement and the World Health Organization, with Trump arguing that such commitments neither align with national values nor justify the financial burdens placed on American taxpayers. 

These executive orders underscored Trump’s intention to continue and intensify his “America First” policy. This strategy, which entails a higher degree of isolationism and transactional diplomacy, prioritises national interests over multilateral commitments and emphasises military strength as a key component of international engagement.  

One key area where Trump’s doctrine is already shaping US foreign policy is the country’s relationship with Taiwan. The island’s strategic importance to the US lies in its geopolitical position as well as its key role in global supply chains, especially in the semiconductor sector. These factors make Taiwan both an economic and strategic linchpin in the US efforts to counterbalance China’s growing influence. 

This also has important implications for the European Union. Given Taiwan’s unique strategic importance, US actions towards the island could have profound ripple effects on EU trade, defence strategies, and broader diplomatic relationships. 

A crucial player 

Taiwan occupies a critical position between China and key US and EU allies such as Japan and the Philippines. Geographically, it is part of the “first island chain”, a defensive line that serves to limit Chinese military expansion into the Pacific.  

If Beijing were to gain control of Taiwan, it would enable the Chinese military to project power further into these waters, potentially disrupting naval operations by the US and its allies. The island’s position is key for US and EU security interests, as it helps to counterbalance China’s influence in the region.  

Control of the island would also grant China dominance over the Taiwan Strait, a vital global economic artery. This narrow waterway connects the East and South China seas, facilitating maritime trade between northeast Asia and markets in Europe and beyond. Around 40 per cent of the EU’s annual trade, including critical raw materials, passes through the Taiwan Strait. Any disruption would have catastrophic economic consequences for all countries dependent on these routes. 

The island’s position is key for US and EU security interests, as it helps to counterbalance China’s influence in the region. 

Additionally, Taiwan is indispensable to the tech sector since Taiwanese companies collectively produce 68 per cent of chips in the world. The largest of these enterprises, TSMC (Taiwan Semiconductor Manufacturing Company), makes at least 90 per cent of the world’s most advanced computer chips. 

The advanced semiconductors are vital for industries ranging from automotive manufacturing to artificial intelligence (AI) and the military. Some TMSC-produced chips are essential for AI applications used by US tech giants like Google and Microsoft. Taiwan is also producing two-thirds of the world’s AI servers – essential for supporting the AI workload – and intends to remain at the helm of artificial intelligence innovation, including by building a “Silicon Valley” in the south of the island. The project is aimed at researching and developing high-performance computing, large-scale data storage, and AI applications.  

If China gained control over the semiconductor and AI industries, it would not only dominate the global semiconductor supply chain but increase its influence over technological innovation worldwide. 

Beijing’s tightening grip 

China’s claims on Taiwan have escalated in recent years as Beijing views the island as a breakaway province and an inseparable part of its territory. Under the “One China” principle, the Chinese government asserts itself as the sole legitimate authority over both mainland China and Taiwan, despite the latter functioning as a self-governing political entity. The island has its own government and democratic institutions and holds regular elections.  

Historically, Taiwan has had periods of Chinese governance. From the 17th to the 19th century, it was administered as part of China’s Fujian Province. Following the First Sino-Japanese War in 1895, Taiwan was ceded to Japan and remained under Japanese rule until the end of World War II, when it was returned to Chinese administration. Today, however, public sentiment on the island reflects a strong sense of Taiwanese identity, with many citizens favouring either maintaining the status quo or pursuing formal independence from China.  

China has escalated military threats against its neighbour.

At the opening session of the 20th Chinese Communist Party National Congress in 2022, President Xi Jinping declared that “resolving the Taiwan issue is a matter for the Chinese, a matter that must be resolved by the Chinese.” While Xi expressed a preference for peaceful “reunification”, he also emphasised that China would never renounce the use of force and reserved the right to take “all measures necessary”.  

Since then, China has escalated military threats against its neighbour. Following last year’s inauguration of Taiwan’s new president, William Lai Ching-te – who is seen as more assertive towards Beijing than his predecessor – Beijing has ramped up its military activity. In May 2024, the People’s Liberation Army (PLA) conducted drills involving its army, navy, air force, and rocket force. In October, China launched a large-scale military exercise around Taiwan in response to Ching-Te’s National Day speech, with more military drills following in December 2024.  

Xi Jinping has ordered the PLA to be ready to take over Taiwan by force by 2027 if efforts to reunify the island by other means fail. This has started an unprecedented military modernisation and expansion effort for the army, putting more pressure on Taiwan. 

According to US military commander Admiral John Aquilino, China is currently on track in its preparations for this potential invasion. The PLA’s budget has increased by 16 per cent in recent years, with Beijing acquiring over 400 fighter jets and 20 warships. Admiral Aquilino has warned that China’s military preparations are nearing levels not seen since World War II. 

Washington’s mixed signals 

Seemingly capitalising on the increasing pressure exerted by China over Taiwan, Donald Trump stated during his 2024 presidential that the island should “pay more” for its defence to prevent a Chinese invasion, likening US military support to an insurance policy. He also proposed that Taipei dramatically increase its defence spending from 2.5 to ten per cent of its GDP. 

Trump’s first administration had already significantly increased arms sales to Taiwan, approving around 21 billion dollars of military equipment for the island over four years. This included advanced weaponry and systems designed to enhance Taiwan’s asymmetric defence capabilities. While most of these weapons have still not been delivered , Trump will likely focus on selling Taiwan more arms in his second term. 

However, the US president’s demands have frustrated Taiwanese officials. In response to Trump’s remarks, Foreign Minister Lin Chia-lung retorted that his country has been paying the US for its defence for decades. “To make America great again, you cannot do it without Taiwan,” he stressed, pointing to Taipei’s key role in semiconductor production. 

Trump will likely focus on selling Taiwan more arms in his second term. 

Trump’s insistence on greater defence burden-sharing reflects his broader foreign policy vision, wherein allies are expected to shoulder more financial responsibility for their security arrangements. Furthermore, he has criticised the US’s NATO allies for not meeting their defence spending commitments and pushed EU countries to increase their military budgets and collective defence efforts. Now, he is pressuring NATO members to raise their defence spending to 5 per cent of their GDP, a whopping increase from the official 2-per cent recommendation. 

The US president’s approach to Taiwan is also marked by strategic ambiguity, a policy aimed at deterring both Chinese aggression and any unilateral Taiwanese moves towards independence.  

On the one hand, actions such as arms sales signal strong support for Taiwan. On the other, Trump’s refusal to state whether he would defend Taiwan in the face of Chinese aggression introduces an element of unpredictability, serving to confuse both Taipei and Beijing. While this ambiguity could act as a deterrent to Chinese aggression, it could also backfire, potentially heightening regional tensions. 

In a similar vein, Trump’s interactions with Xi Jinping have alternated between personal rapport and strategic rivalry. While Trump expressed admiration for Xi and hosted him at Mar-a-Lago in 2017, his administration adopted hardline stances on trade and security issues, including stronger support for Taiwan.  

The US president’s recent inflammatory rhetoric on Greenland and the Panama Canal – as he has refused to rule out the potential use of force to secure these regions that are deemed strategically important to US national security – could embolden China to consider similar actions against Taiwan. In turn, this could further increase the risk of regional conflict. 

Trade wars and tech battles 

Trump’s approach to Taiwan is also in line with a strategy of pursuing US economic interests over multilateral collaboration and mutual benefits. He has explicitly accused Taipei of “stealing” American jobs in the semiconductor sector – an industry he views as an economic and strategic priority. Trump is pushing for the US to become the world leader in advanced microchip production, which will also solidify its dominance in AI.  

Furthermore, Trump has expressed a critical stance towards US subsidies for Taiwanese firms, arguing that Washington should not financially support wealthy companies like TSMC. This could lead to a reevaluation of how these corporations operate in the US, and a possible cut in subsidies. 

In 2021, TSMC announced plans for a 12-billion-dollar semiconductor facility in Arizona. The Trump administration must now decide whether to continue Biden’s 6.6-billion-dollar subsidy policy for the project, which was funded as part of the CHIPS and Science Act.  

Meanwhile, the EU is also increasingly becoming aware of the strategic importance of semiconductors. Washington’s focus on Taiwan’s chip industry aligns with the bloc’s interests in enhancing its technological capabilities and reducing dependency on external sources. To that end, Brussels has launched the Chips for Europe Initiative with a budget of 15.8 billion euros until 2030. The plan aims to double the EU’s share of global semiconductor production from 10 to 20 per cent by the end of the decade.  

However, in their drive to lead the semiconductor industry, the US and the EU are failing to acknowledge and address China’s indispensable role in supplying rare earth elements (REE) – such as dysprosium, neodymium, and terbium – needed for manufacturing chips. China controls around 70 per cent of global rare earth mining output and 85 per cent of processing capacity, giving it a near-monopoly on both the extraction and refining of raw materials. For instance, the country possesses the largest known dysprosium reserves, accounting for roughly 60 per cent of the global total, with refining mostly concentrated in a single facility in Wuxi. 

While efforts to mitigate reliance on Beijing are underway, they are unlikely to reduce the need for cooperation with China significantly.

Brussels and Washington are striving to address this dependency by diversifying their supply chains away from Beijing. The EU’s Critical Raw Materials Act (CRMA) sets ambitious targets for domestic extraction, processing, and recycling. By 2030, the bloc aims to source at least 10 per cent of its annual consumption of critical raw materials domestically, with 40 per cent of processing and 15 per cent of recycling capacities based in the EU. No more than 65 per cent of each strategic raw material can be sourced from a single third country. 

Meeting these ambitious goals, however, will be challenging. Recycling capacity for rare earth elements remains underdeveloped, and many materials, like dysprosium, are difficult to find outside China. Alternative suppliers often lack the scale or refining infrastructure to counterbalance Beijing’s dominance. 

Ultimately, while efforts to mitigate reliance on Beijing are underway, they are unlikely to reduce the need for cooperation with China significantly. Given the country’s control over critical resources, a constructive relationship with Beijing remains a necessity for securing the materials needed for semiconductor production. Yet such cooperation might become increasingly difficult as China is bolstering the domestic semiconductor industry to reduce its own dependence on external suppliers. In 2024 alone, it invested around 42 billion euros to accelerate the development of advanced microchips.  

Following the 2022 US ban on exporting technologies related to making advanced microchips, China has also been exploring alternative production methods, including using a particle accelerator to create high-quality light sources for chip manufacturing. If successful, these efforts could enable Beijing to produce cutting-edge semiconductors independently of Western technologies, further solidifying its dominant position in the sector. 

The Chinese masterplan 

In addition to its advances in the semiconductor industry, China seems ready to shape its own alliances to tackle the return of Trump’s “America First” doctrine, especially on issues related to trade and Taiwan. Shortly after his inauguration, the US president had a “friendly” phone call with Xi Jinping, during which they also discussed Taiwan. But the day after, the Chinese leader spoke with Russian President Vladimir Putin, with both leaders reaffirming their commitment to strengthening their countries’ strategic partnership. Xi also emphasised his readiness to elevate bilateral relations to “a new height”, citing growing cooperation and increasing trade between the two nations. Finally, both presidents expressed their shared goal of promoting a “more just multipolar global order” – a clear challenge to US dominance. 

When it comes to Taiwan specifically, alongside its military modernisation efforts and frequent drills, China is working to diplomatically isolate the island by reinforcing the “One China” principle. This involves pressuring nations to avoid formally recognising Taiwan and limiting Taipei’s participation in global organisations. 

A recent example of this diplomatic pressure occurred in 2024 when the Pacific Islands Forum, an intergovernmental organisation promoting regional cooperation in Oceania, removed references to Taiwan from an official communique following complaints from China. In January 2025, the Solomon Islands called for Taiwan’s exclusion from future forum events, a move that appeared to be a direct response to Chinese pressure. 

Similarly, Chinese authorities are likely to leverage the country’s influence in other international platforms, such as BRICS+, to further Beijing’s agenda. BRICS+, a rapidly expanding bloc of emerging economies originally founded by Brazil, Russia, India, and China, provides a platform for Beijing to coordinate policies that counter Western influence with countries around the world, including on Taiwan. 

Which course will Europe chart?  

The EU, like China, is approaching Trump’s second presidency with a more prepared and strategic mindset. Ursula von der Leyen, the president of the European Commission, has emphasised that the bloc would adopt a “pragmatic” approach towards the new US administration while firmly safeguarding its strategic interests. 

Regarding China and Taiwan, the EU and US are aligned in several key areas. Beyond the semiconductor strategies already discussed – with both powers striving to enhance domestic production and reduce reliance on Taipei and Beijing – Brussels has adopted a more assertive and confrontational trade policy with China, mirroring US concerns about Chinese economic influence. 

One notable measure is the 2023 Foreign Subsidies Regulation, which imposes stricter screening mechanisms on state aide to businesses outside the bloc in order to protect the EU’s internal market from potential distortion. Subsequently, in 2024, the EU started imposing duties on heavily subsidised electric vehicles from China, which has emerged as the biggest player on the market.  

This hardline approach may facilitate cooperation between Brussels and Washington. However, the EU is likely to tread carefully in areas where US policies, such as the militarisation of Taiwan, might escalate tensions. While the EU views Taipei as a trusted partner, it also adheres to the “One China” policy and prefers a balanced strategy prioritising dialogue over confrontation. 

With the new US administration expected to exert pressure on the EU to align more closely with its agenda – particularly on trade, technology transfer, and security – the EU will have to strike a careful balance: taking decisive, autonomous actions to protect the Union’s strategic interests while fostering cooperative ties with the US, China, Taiwan, and other key players.  

By pursuing this nuanced approach, the EU can position itself as a stabilising force and a leader in promoting dialogue and engagement in an increasingly polarised global landscape under a second Trump presidency.