US, Taiwan Clinch Deal to Cut Tariffs, Boost Chip Investment

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(Bloomberg) — The US 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.

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Under the terms, which the White House was poised to announce 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 agreements last year. 

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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 US. In addition, Taiwan agreed to provide an additional $250 billion in credit guarantees for further investment in the American semiconductor supply chain. 

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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. 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.

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TSMC and other companies will take the lead on the $250 billion in planned investment, US Commerce Department officials familiar with the details say. Commerce Secretary Howard Lutnick led talks on the pact, built around semiconductors and the sectoral 232 tariffs, the official said.

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Earlier: Trump Team Nears Taiwan Trade Deal With More US Chip Investment

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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.

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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 statement. 

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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.