Shares of Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM) took a hit, dropping over 2% following comments made by Presidential candidate Donald Trump. As per a Reuters report, Trump suggested that Taiwan should compensate the United States for its defense.
What Happened: Trump’s remarks, made during a Bloomberg Businessweek interview on June 25 and published on Tuesday, indicated that Taiwan should bear the cost of its defense. “I know the people very well, respect them greatly. They did take about 100% of our chip business. I think, Taiwan should pay us for defense,” he said.
TSMC, a key player in the advanced chip manufacturing industry, significantly influences the global economy. Any discord over Taiwan could potentially wreak havoc on the world economy.
While the U.S. is Taiwan’s main international supporter and arms provider, there is no formal defense agreement between the two nations. Nevertheless, the U.S. is legally bound to equip Taiwan with the means to defend itself.
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TSMC, currently in its quiet period before its second-quarter earnings report on Thursday, has yet to comment on Trump’s remarks. The Taiwanese government has also not issued any immediate response.
Why It Matters: Earlier this year, a war game simulation warned of a grim outcome for Taiwan if tensions with China escalated during a hypothetical Trump return to the White House. The simulation ended with Taiwan unable to meet the demands of China and the U.S.
In March, Taiwan’s foreign ministry expressed confidence in the continuity of U.S. support, irrespective of the presidential election outcome.
Amid growing threats from China, Taiwan's new Minister of Science and Technology, Wu Cheng-wen, expressed confidence in TSMC's ability to protect its proprietary advanced technology as it expands overseas.
Despite the U.S. support, Taiwan’s Vice President-elect, Hsiao Bi-khim, emphasized the importance of Taiwan’s self-strengthening and not solely depending on international support.
Price Action: TSMC traded 1.1% lower at $184 in the after-hours trading at the time of writing, the company’s shares closed 0.4% higher at $186.04 in the regular session, according to data from Benzinga Pro.
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This story was generated using Benzinga Neuro and edited by Shivdeep Dhaliwal
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