US Allies That Can’t Catch a Break

Last month, as China unleashed DeepSeek onto the world, the chairman of the South Korean ruling party’s AI committee wrote on Facebook: “For us… this is truly a frightening development”.

Fear is an understandable response. South Korea has, for long, voiced an ambition to pioneer artificial intelligence. But the country has struggled even to play catch-up. Last week, South Korean experts warned that the country needs to pull up its socks on innovation or “it will completely fall out of the global top-tier group.”

The story is similar for South Korea’s close competitor Japan which, two days after DeepSeek’s launch, said it will “draw up a basic plan” to promote the development and use of AI. That was nearly three months after the country announced a $65 billion investment into AI and chips.

At a time when AI has grown at blink-and-miss speeds, the two veteran Asian tech hubs seem to be moving at a logic-defying snail’s pace to enhance their tech abilities. And it does not help that US President Donald Trump is about to throw a wrench at their economies.

Trump’s tariff promises (which are hard to keep up with at this point) pose big risks to the export-reliant economies of Korea and Japan. Come April, Trump plans to impose steep tariffs on imports of chips and automobiles, and the auto tariffs will hurt Korea and Japan the most. South Korea sent nearly half of its total auto exports to the US last year, while Japan sent more than a third. 

The chip tariffs will be a giant headache for a third American ally — Taiwan (more on that shortly) — but they will also pose a different danger to South Korea and Japan. 

Both countries have, over the past year, aligned themselves more closely to American chip policies, thanks to the heavy hand of the then-Joe Biden government. That’s meant increasing restrictions on shipments of chips and chip equipment to China.

China, meanwhile, has still managed to buy up more than half of the chips coming from Korea. It has also bought up nearly half of Japan’s shipments of chipmaking equipment. And in the face of increasing US pressure, China’s chip-hungry tech giants will rely even more on both countries.

But therein lies Japan and Korea’s conundrum. As the US-China trade war intensifies, the Trump government will undoubtedly lean further on its two key Asian allies to take its side. That choice would come at a big price for both Japan and South Korea: cutting off a major trade partner while facing large tariffs imposed by another — neither of which will be good for their economies and, in effect, their ambitions such as catching up on AI.

Theirs would be a choice between a very risky trade partner and a most unpredictable president.

Taiwan’s 99 problems — AI isn’t one 🤖

Unlike South Korea and Japan, Taiwan is at the top of the AI game. The island — about one-twelfth the size of California — is the literal backbone of artificial intelligence, supplying more than 90% of the advanced chips that power the tech. From Nvidia and Microsoft to OpenAI and Meta, the world’s biggest AI companies rely on Taiwan to supply them with everything from servers and processors to the liquid cooling systems and other dizzying amount of components and systems that make AI possible. 

But the island, already under constant threat from China, now faces the added vulnerability from angering its closest ally and biggest chip buyer - the US. Trump says Taiwan has stolen American chip businesses and his chip tariffs are largely aimed at the island.

Taiwanese officials, meanwhile, say that while the US did help the island develop its chip capabilities early on, its current dominance of the industry has been made possible through its own research and investment. Insiders credit the growth of the Taiwanese chip sector to an “extensive collaboration between industry, government and academia.”

It is no surprise then, that the Taiwanese government currently finds itself in a struggle to appease Trump while protecting its chip interests. And for now, it seems to have dug in its heels to do both, by expanding production in the US, while indicating it will not allow TSMC, its ‘sacred mountain’, to share its trade secrets with the US. On the latter, it will find support from Taiwanese citizens — more than 80% of whom are in no mood to share the island’s chip tech with America.

• Stock markets across the world have sunk to their lowest levels in close to four weeks over fears of a global trade war.

• North Korea carried out the world’s biggest crypto heist this month as its hackers stole about $1.46 billion in digital assets from ByBit.

• Singapore’s biggest bank DBS says it will cut at least 4,000 jobs over the next three years amid increasing use of AI.
  

• And Chinese vessels could be charged up to $1.5 million to enter US ports, under a proposal by the US Trade Representative’s office.