The United States and Taiwan signed a landmark trade agreement Thursday that significantly slices tariffs on Taiwanese exports while gaining massive investments in American semiconductor production as well as deepening Washington’s ties with Taipei amid rising tensions with China.
The deal lowers the broad tariff rate on most Taiwanese goods from 20% to 15% with certain products receiving even more favorable treatment. Generic pharmaceuticals, aircraft components, and select natural resources will enter the U.S. duty-free, according to the Commerce Department. Sector-specific tariffs on auto parts, timber, lumber, and wood products will also be capped at 15%.
In exchange, Taiwan committed to an investment package worth at least $500 billion. Taiwanese technology companies will make direct investments of at least $250 billion to expand semiconductor, energy, and artificial intelligence (AI) production on American soil. Taiwan will provide an additional $250 billion in credit guarantees to facilitate further investment in the American semiconductor supply chain.
The agreement particularly benefits Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, which produces microchips for companies ranging from Apple Inc. to NVIDIA Corp. TSMC has already committed $100 billion in U.S. investments with more planned. Commerce Secretary Howard Lutnick revealed that TSMC recently purchased hundreds of acres adjacent to its Arizona facilities for potential expansion.
Under the deal’s terms, Taiwanese chipmakers expanding U.S. production will receive preferential tax treatment on semiconductors they import into the United States. The Commerce Department said the agreement “will drive a massive reshoring of America’s semiconductor sector.”
Lutnick outlined an ambitious goal of bringing 40% of Taiwan’s entire semiconductor supply chain and production capacity to the United States. “We’re going to bring it all over, so we become self-sufficient in the capacity of building semiconductors,” he said.
The agreement follows months of negotiations as Taiwan sought to reduce U.S. tariffs while avoiding duties on its critical chip exports. Taiwan’s trade surplus with the United States reached approximately $74 billion in 2024, with information and communications technology products including semiconductors comprising more than half of its exports to America.
The deal arrives at a sensitive moment, as China increases pressure on Taiwan and the Trump administration works to balance its economic relationship with Beijing while strengthening ties with the democratic island that Beijing claims as its territory.
