The United States and Taiwan finalized a comprehensive trade agreement on Thursday, reducing tariffs on a broad range of goods from the island, a leader in the global semiconductor industry, and paving the way for significant new investments within America’s technology sector—a move that risks sharpening tensions with China.
The accord, which marks a notable strengthening of the Trump administration’s engagement with Taipei, arrives at a delicate moment, as Beijing increases diplomatic and economic pressure on Taiwan, which it considers part of its territory. While Washington seeks to bolster economic ties with Taiwan, it has continued efforts to prevent a full-blown trade confrontation with China.
Key features of the agreement include lower tariffs for Taiwanese semiconductor firms supplying the U.S. market. Companies such as TSMC that expand operations on American soil will benefit from reduced import duties on chips, manufacturing equipment, and related products, with some items qualifying for duty-free entry. Meanwhile, the standard tariff rate on most other Taiwanese goods shipped to the U.S. will decrease from 20% to 15%.
Additionally, according to the Commerce Department, products like generic pharmaceutical drugs, aircraft parts, and certain “unavailable natural resources” will face zero tariffs under the deal. Taiwanese authorities stated that the U.S. has assured Taiwan of continued fair treatment under any future adjustments to U.S. chip tariffs.
As part of the arrangement, Taiwanese entities are set to invest $250 billion in boosting domestic production of semiconductors, energy, and artificial intelligence in the United States. That sum encompasses a $100 billion investment already pledged by TSMC last year, with further spending anticipated, U.S. Commerce Secretary Howard Lutnick confirmed.
Moreover, Taiwan has committed to extending an additional $250 billion in credit to support the expansion of investment, according to the Trump administration.
In a CNBC interview on Thursday, Lutnick explained that the initiative aims to transition 40% of Taiwan’s semiconductor manufacturing capabilities and supply chain to the U.S., adding that companies failing to build in the United States could be subject to tariff rates as high as 100%.
