The United States has clinched a sweeping agreement with Taiwan that would reduce tariffs on the “Silicon Island” in exchange for up to a quarter‑trillion dollars in investments, a move that carries significant security implications for Taipei amid mounting pressure from China.
The deal follows similar arrangements Washington struck last year with Japan, European countries and China that brought down trade duties Trump had ratcheted up since April as part of a campaign to cut trade deficits and revive American manufacturing.
Why It Matters
The agreement comes as a relief to Taiwanese exporters and marks a boost for U.S. efforts to expand domestic production of critical technologies, particularly semiconductors used in everything from consumer electronics to advanced military systems. That push for onshoring accelerated during the COVID‑19 pandemic.
Taiwan accounts for roughly 60 percent of global semiconductor output and more than 90 percent of cutting‑edge nodes, including those used to power artificial intelligence technologies central to Washington’s tech competition with China.
Newsweek reached out to the White House and to Taiwan’s Foreign Ministry and representative office in Washington, D.C., with written requests for comment.
What To Know
Taiwan’s de facto embassy in the United States and the American Institute in Taiwan, the U.S. government‑run office that handles Washington’s unofficial relations with Taipei, signed the agreement, the Commerce Department said Thursday.
Taiwan President Lai Ching-te called it a “landmark agreement,” saying the partners would see “boosted economic integration, high-tech collaboration an two-way investments across key sectors, paving the way for a stronger partnership and more prosperous future.”
Under the deal, chipmakers such as Taiwan Semiconductor Manufacturing Company (TSMC) and other tech firms will commit at least $250 billion to expand U.S. capacity for advanced chips, clean‑energy technology, and AI. Taiwan will also provide $250 billion in credit guarantees to support Taiwanese companies building out the U.S. chip ecosystem.
Taiwan and the U.S. will also jointly establish “world‑class” industrial parks in the United States to reinforce Washington’s push to become a global hub for innovation and advanced manufacturing.
In exchange, U.S. tariffs on Taiwanese goods will be capped at 15 percent. Taiwanese aircraft components and generic pharmaceuticals, along with their ingredients, will be subject to a 0 percent tariff.
Section 232 duties on Taiwanese lumber, timber, wood‑derived products, and auto parts will also be lowered. Section 232 duties are essentially national‑security tariffs imposed by the Commerce Department on selected imports to protect industries deemed essential to U.S. defense and critical supply chains.
The U.S. accounted for just 10 percent of global wafer fabrication in 2024, down from 37 percent in 1990, according to the Commerce Department.
“China firmly opposes the negotiating and signing of any agreement with sovereign connotations and an official nature between China’s Taiwan region and countries having diplomatic relations with China,” Chinese Foreign Ministry spokesperson Guo Jiakun told reporters Friday.
What People Are Saying
New Jersey Representative Chris Smith, co-chair of the Congressional-Executive Commission on China, said in a statement: “At a critical moment when the United States and Communist China are locked in a tight race for technological dominance, Taiwan’s impressive investment in U.S. technological development makes a world of difference.”
David Sacks, a fellow for Asia studies at the Council on Foreign Relations, said in a statement shared with Newsweek: “Beneath the surface of Taiwan’s pledges to increase U.S. trade ties lies an apprehension about the United States’ ultimate objectives, and what a potential rebalancing of global supply chains would mean for the island’s security. If the United States successfully onshores chip production, it may no longer care about Taiwan’s security and, therefore, not defend it from Chinese aggression.”
What Happens Next
China claims Taiwan as its territory and has vowed to bring the island under its control, through force if necessary. While the United States does not formally recognize Taiwan as a sovereign state, it remains the island’s main arms supplier, and its long‑standing policy of strategic ambiguity over whether it would defend Taiwan is widely seen as a key factor deterring Beijing.
But doubts over U.S. reliability have grown in Taipei over the past year, fueled by remarks from President Donald Trump, including falsely accusing Taiwan of stealing America’s chip industry and suggesting the island should pay protection money.
Trump has said Chinese President Xi Jinping assured him China would not move against Taiwan during Trump’s second term.
“I’ve expressed to him that I would be very unhappy if he did that, and I don’t think he’ll do that. I hope he doesn’t,” Trump said in an interview with The New York Times last week.
