US and Taiwan Ink $500B Tech & Trade Deal
King TenA major US-Taiwan trade deal finalizes a $500B semiconductor investment and tariff cuts, bolstering American chip production.
The United States and Taiwan have finalized a major trade agreement that includes a $500 billion investment commitment from Taiwanese semiconductor companies into American operations and a reduction in tariffs on goods from the island.
Under the new terms, tariffs on Taiwanese shipments will drop from 20% to 15%. This brings Taiwan in line with Japan and South Korea, which secured similar agreements last year. The deal resolves a significant point of contention between the US and Taiwan, which Washington supports militarily.
A Closer Look at the Investment and Tariffs
The agreement's financial core is a massive two-part investment from Taiwan's technology sector aimed at bolstering the American semiconductor supply chain.
• Direct Investment: Taiwanese firms will commit to at least $250 billion in direct investments to expand advanced semiconductor, energy, and artificial intelligence facilities in the United States.
• Credit Guarantees: An additional $250 billion will be provided in credit guarantees to support further investment in the US chip industry.
Commerce Department officials confirmed that Taiwan Semiconductor Manufacturing Co. (TSMC) and other companies will spearhead the direct investment portion of the plan. The negotiations, led by Commerce Secretary Howard Lutnick, centered on semiconductors and the framework of the sectoral 232 tariffs.
The agreement also establishes specific tariff caps for other industries. US tariffs on Taiwanese auto parts, timber, lumber, and wood derivative products will be capped at 15%. Furthermore, generic pharmaceuticals manufactured in Taiwan will face no import taxes.
TSMC at the Heart of US Chip Expansion
While the White House statement did not single out TSMC, the deal has direct consequences for the world's leading producer of AI chips. Reports earlier in the week suggested the agreement would require TSMC to construct at least four additional chip manufacturing plants in Arizona. This expansion would add to the six factories and two advanced packaging facilities the company has already pledged to build in the state.
To support this expansion, the deal provides tariff relief for companies building new US facilities. They will be permitted to import 2.5 times their current capacity tariff-free during the construction phase. Once the production facilities are operational, that cap will be lowered to 1.5 times their current capacity.
The Strategic and Political Backdrop
The agreement was announced shortly after a Taiwanese delegation visited Washington to finalize the terms with President Donald Trump's representatives. For months, Taiwanese officials had suggested a pact was imminent.
The deal's framework stems from a Commerce Department investigation that determined chip imports pose a threat to US national security. Instead of imposing broad tariffs, President Trump directed his administration to negotiate arrangements with major exporters. A narrow 25% duty was applied only to certain advanced semiconductors intended for overseas shipment, a move relevant to Nvidia Corp.'s plans to send Taiwan-made H200 AI processors to China.
Taipei was reportedly eager to conclude a deal before a potential meeting between President Trump and Xi Jinping in China, expected in April. The announcement also comes as the Supreme Court prepares to rule on Trump's global tariffs, a decision that could affect his authority to set levies unilaterally.
Economic Implications for Taiwan
This agreement provides a boost to Taiwan's economy, which is already thriving on the back of high demand for its tech exports, particularly the accelerators and servers fueling the global AI boom.
Taiwan recently revised its GDP growth forecast for 2025 to 7.3%, which would mark its strongest performance since 2010. The surge in tech exports also helped drive its annual trade surplus with the US to a record $150 billion in 2025.
Taiwanese President Lai Ching-te has expressed support for Trump's goal of reindustrializing the US, though he noted that reforms to American land, electricity, and workforce policies are necessary for projects to succeed. Previously, Taipei had resisted a request to move enough chip production to the US to satisfy half of America's demand.
