Trump’s Tariff Threats Could Have a Significant Impact on TSM Stock

The Trump Administration’s threat to impose a 100% tariff on select semiconductor products could have a significant impact on Taiwan and companies like Taiwan Semiconductor Manufacturing Company (TSM). According to Michelle Lam, a Greater China economist at Société Générale, U.S. chip demand accounts for 5% of Taiwan’s GDP through direct exposure. This is because Taiwan directly exports a relatively small amount of semiconductors to the U.S., but a larger portion of chip exports are processed in other countries and then re-exported to the U.S.

The potential tariffs could be costly for the entire supply chain by putting end products like phones and PCs at risk of double tariffs. It’s worth noting that Taiwan’s overall chip industry is substantial and accounts for 15% of its GDP. The country is also a global leader in integrated circuit design, manufacturing, and packaging and testing. With the U.S. accounting for about a quarter of global semiconductor demand, 5% of Taiwan’s GDP is at risk if tariffs on chips are imposed.

Consequences Not Limited to Taiwan

The consequences of these tariffs wouldn’t be limited to Taiwan. In fact, U.S. companies like Nvidia (NVDA) and Advanced Micro Devices (AMD) have outsourced production to factories like Taiwan Semiconductor Manufacturing Company. By imposing tariffs on the downstream sector, there could be spillover effects on these upstream companies in the U.S., as well as their end-users. While tariffs might incentivize investment in the U.S., they could also be highly disruptive.

Is TSM Stock a Buy, Sell, or Hold?

Turning to Wall Street, analysts have a Strong Buy consensus rating on TSM stock based on five Buys, one Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 70% rally in its share price over the past year, the average TSM price target of $243.67 per share implies 16.1% upside potential.

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