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Taiwan Trade Pact Pledges $500 Billion for US Chipmaking
Financing and Investment Aim to Expand American Supply Chain
Key Takeaways:
- The U.S. and Taiwan agreed to a trade deal announced Jan. 15 cutting tariffs on Taiwanese goods to 15% and tying it to semiconductor investment.
- It includes $250 billion in direct investment and $250 billion in credit guarantees, with implications for TSMC expanding U.S. chip plants, officials said.
- The framework caps sector tariffs at 15%, grants temporary tariff-free chip imports during construction and reflects Washington’s push to shift production amid China tensions.
The U.S. and Taiwan agreed to a long-sought trade agreement that would lower tariffs on goods from the self-governed island to 15% and see Taiwanese semiconductor companies increase financing for American operations by $500 billion.
Under the terms, which the White House was poised to announce Jan. 15, duties on Taiwanese shipments would fall from the previous 20% rate — putting them on par with Japan and South Korea, which reached their own agreements last year.
Taiwan’s technology industry would also commit to making at least $250 billion in direct investments to expand advanced semiconductor, energy and artificial intelligence operations in the U.S. In addition, Taiwan agreed to provide an additional $250 billion in credit guarantees for further investment in the American semiconductor supply chain.
A White House statement outlining the deal did not specifically mention Taiwan Semiconductor Manufacturing Co., but the arrangement has clear implications for the company, which is the world’s top producer of AI chips. But Commerce Secretary Howard Lutnick, speaking after the deal was reported in an interview with CNBC, said he expected the company “to come in huge, bigger — you’ve seen reports on possibly doubling in size.”
(CNBC)
Bloomberg reported earlier this week that the accord would call for TSMC to build at least four more chip manufacturing plants in Arizona, adding to the six factories and two advanced packaging facilities it has already promised to open there.
TSMC and other companies will take the lead on the $250 billion in planned investment, U.S. Commerce Department officials familiar with the details say. Lutnick led talks on the pact, built around semiconductors and the sectoral 232 tariffs, the official said.
Lutnick told CNBC that the credit guarantees would largely benefit smaller and medium sized Taiwanese firms building in the U.S. He indicated the government made the concession because they 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.
The deal removes a major point of contention between the democracy of 23 million people, which China wants to control, and the U.S., 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.
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The framework also caps sector-specific U.S. 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 statement.
In addition, Taiwanese semiconductors would receive relief from future tariffs. Companies building new U.S. 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 U.S. 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.
RELATED: Trump Backs Nvidia Deal With China, Adds Chip Tariff
Taipei has been trying to conclude a deal with the U.S. before Trump meets Xi Jinping in China, Bloomberg News reported earlier. The U.S. 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 U.S. 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 U.S. to cover half of America’s demand.
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 U.S. to a record $150 billion in 2025.
