(Jan 15) : The US and Taiwan agreed to a long-sought trade pact that would lower tariffs on goods from the self-governed island to 15% and see Taiwanese semiconductor companies increase financing for American operations by US$500 billion.
Under the terms, which the Trump administration announced Thursday, duties on Taiwanese shipments would fall from the previous 20% rate — putting them on par with Japan and South Korea, which reached their own deals last year. The new rate would not stack on top of existing most-favored-nation duties, according to a statement from the cabinet in Taipei.
Taiwan’s technology industry would also commit to making at least US$250 billion in direct investments to expand advanced semiconductor, energy and artificial intelligence operations in the US. That includes previous commitments by Taiwan Semiconductor Manufacturing Co., Commerce Secretary Howard Lutnick said, which total US$165 billion. In addition, Taiwan agreed to provide an additional US$250 billion in credit guarantees for further investment in the American semiconductor supply chain.
A US Commerce Department statement outlining the deal did not specifically mention TSMC, but the arrangement has clear implications for the company, which is the world’s top producer of AI chips. Lutnick said in an interview with CNBC that he expected the company “to come in huge, bigger — you’ve seen reports on possibly doubling in size.”
The accord would call for TSMC to build at least four more chip manufacturing plants in Arizona, according to a person familiar with the matter, adding to the six factories and two advanced packaging facilities it has already promised to open there.
The US also said it would grow investments in key Taiwanese industries, including semiconductors, AI, defense and biotechnology, according to the Taipei cabinet statement.
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TSMC and other companies will take the lead on the US$250 billion in planned investment, according to Commerce Department officials familiar with the details. Lutnick and US Trade Representative Jamieson Greer led talks on the pact, officials said.
Lutnick told CNBC that the credit guarantees would largely benefit small- and medium-sized Taiwanese firms building in the US. He indicated Taiwan made the concession because it had been threatened with a massive levy on its goods.
“If they don’t build in America the tariff’s likely to be 100%,” Lutnick said. “If they commit to build in America, they can bring in their semiconductors during the time they’re building in America without a tariff.
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The deal removes a major point of contention between the democracy of 23 million people, which China wants to control, and the US, Taipei’s main military backer. Taiwanese officials have for months indicated that a pact was close, but one never materialized. The agreement was announced shortly after a delegation of top Taiwanese officials visited Washington to finalize the deal with President Donald Trump’s representatives.
The framework also caps sector-specific US tariffs on auto parts, timber, lumber and wood derivative products from Taiwan at 15%. Generic pharmaceuticals made on the island would face no import taxes, according to the Commerce statement.
In addition, Taiwanese semiconductors would receive relief from future tariffs. Companies building new US operations would be able to import 2.5 times their current capacity tariff-free during construction, with a lower rate applied to shipments above that quota. That cap would lower to 1.5 times current capacity once production facilities are complete.
The Commerce Department concluded an investigation that found chip imports harm US national security, but held off on imposing broader tariffs. Trump instead ordered senior administration officials with negotiating arrangements with major exporters. It only applied a narrow 25% duty on certain advanced semiconductors to be shipped overseas, a key step in a deal for Nvidia Corp. to ship Taiwan-made H200 artificial intelligence processors to China.
Taipei has been trying to conclude a deal with the US before Trump meets Xi Jinping in China, Bloomberg News reported earlier. The US president is expected to visit China in April.
The deal was announced even as a Supreme Court decision looms on Trump’s global tariffs. If the court rules against the president, it could hamper his ability to unilaterally set levies on foreign countries’ goods.
Taiwanese President Lai Ching-te had indicated he supported Trump’s goal of reindustrializing the US but said American land, electricity and workforce policy reforms were needed so projects could move ahead. Taipei had also pushed back on a request to move chip production to the US to cover half of America’s demand.
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Taiwan received assurances that the US would provide land, utility, infrastructure, tax incentive and visa support to ensure its companies could follow through on their investments, the Taipei cabinet statement said.
The deal removes a mild overhang for Taiwan’s economy, which has boomed because tech exports, such as accelerators and servers that have been in high demand as tech companies rush to develop AI capabilities.
Taiwan recently revised its gross domestic product growth forecast for 2025 to some 7.3%, which would be the highest since 2010. The booming tech exports helped increase its annual trade surplus with the US to a record US$150 billion in 2025.
uploaded by Isabelle Francis
