This should be a good time to be an American Internet company in Taiwan . The new president , Tsai Ing - wen , has pledged to build an Asian Silicon Valley on the island . And the new American president , Donald Trump has threatened a trade war with Taiwan ‘ s rivals in mainland China . The stars would appear to be aligned . So it ’ s surprising that on Feb . 10 , one of America ‘ s most successful digital companies , Uber , had to suspend its operations in Taiwan . At issue was a new law to impose fines up to $ 800 , 000 on unlicensed transportation services like Uber Technologies . “ We have never seen anything like this , ever , ” Damian Alexander Kassabgi , Uber ’ s director of public policy for the Asia - Pacific region , told me last week . “ We received fines in total of $ 8 million . We felt we had no other choice but to suspend our service until the government gave us some other options . ” So far that hasn ‘ t happened . The problem for Uber is that Taiwan ’ s taxi industry has a lot of influence with the government in Taipei . At least this is Uber ‘ s perspective . The company had offered its ride - sharing service for three years in Taiwan , but in August it became a target . At first the government threatened to take away Uber ’ s business license . Then in January , the legislature passed the new law that imposed the fines . “ What we see in Taiwan is a conservative bureaucracy who has not shown willingness to accept or update laws accordingly , ” Kassabgi said . “ The taxi industry won the day . ” The Taiwanese government tells a different story . A Taiwanese government memo from December on the Uber controversy defends the government scrutiny of Uber . “ Most countries regulate public transport businesses because these services affect consumer rights and basic transportation safety , ” it said . “ An appropriate level of government intervention is thus needed to maintain market order and protect the public interest . ” Right now the fate of Uber in Taiwan is in limbo . Kassabgi said that while the State Department has been helpful in pressing Taiwan ‘ s government to reconsider the anti - Uber legislation , so far nothing has changed . There are a few reasons this is important . First , Taiwan is one of America ’ s closest allies in the Asia - Pacific region . The US is the island ‘ s main supplier of military equipment and weapons systems . During the transition , Trump broke precedent and took a phone call from Tsai , raising the prospect that Trump could reject the longstanding “ One China ” policy , under which the US does not recognize Taiwan as an independent nation - state . Trump has since affirmed that he does accept this policy . “ Of all the countries , you ’ d think they would not target US companies , ” said Derek Scissors , an economist who specializes in Asia at the American Enterprise Institute . He added : “ If an American friend will do this , why wouldn ‘ t countries where the US has less of a relationship do this as well ? ” The Uber saga in Taiwan is also a reminder that protectionism is a two - way street . Trump himself has threatened tariffs on companies that sell products in the US market produced outside the US . In one of his first acts as president , he withdrew the US from the Trans - Pacific Partnership , a multilateral trade deal with Asian countries that did not include Taiwan . At the same time , Taiwan ’ s anti - Uber law bolsters Trump ‘ s arguments that America ’ s trading partners take advantage of the US in trade deals . A spokesman for the Taipei Economic and Cultural Representative Office in the US told me that Taiwan was not worried about retaliation . He said Taipei ‘ s goal is to keep companies compliant with local laws . In this case though it looks like this argument is a smoke screen to protect Taiwan ’ s taxi industry . But this is not a zero - sum game . It ‘ s true that Uber disrupts the taxi business in all the countries where it operates . But at the same time , it ’ s not taking jobs away from the local economy . Taxi drivers lose jobs , but new jobs are created for drivers who use Uber ‘ s ride - sharing application . For now , the controversy has the potential to chill trade between Taiwan and the US . Earlier this month , Michael Beckerman , the president and CEO of the Internet Association , which includes Uber and America ’ s other largest Internet companies , warned Tsai that the fines against Uber would have wider ramifications . He wrote in a letter from Feb . 9 , “ Taiwan ’ s hard line against innovative new digital services like those in the peer - to - peer sharing economy will have a chilling effect on your goal of establishing Taiwan as the Silicon Valley of Asia , and will likely have negative effects on US investment in Taiwan more broadly . ” That ‘ s something for Tsai to consider . America now has a president who has threatened to respond in kind to countries that punish US companies to protect their own industries . Is Taiwan ’ s taxi industry worth protecting , if the cost is a trade war with the island ‘ s most important ally ? Uber would like to know . By Eli LakeEli Lake is a Bloomberg View columnist . – Ed . 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