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Washington [US], January 17: Reaching a $250 billion trade agreement between the US and Taiwan could help Washington become more self-sufficient in semiconductor supplies.
Yesterday, January 16th, AP reported that the US and Taiwan had reached a trade agreement the previous day, under which the US would reduce tariffs on Taiwanese goods. In return, Taiwanese companies would invest an additional $250 billion in the US technology sector.
AI Strategic Partner
This is the latest agreement from the US regarding the sweeping tax reform plan announced by President Donald Trump in April 2025. At that time, Washington initially imposed a 32% tariff on Taiwanese goods exported to the US. After negotiations, the tariff rate was reduced to 20%. Now, the new agreement further reduces the tariff on Taiwanese goods to 15%, matching that of other US trading partners in the Asia-Pacific region such as Japan and South Korea.
According to a statement from the U.S. Department of Commerce, the new agreement will establish an "economic partnership" to create several "world-class" industrial parks located in the U.S. to help build domestic manufacturing. Washington described it as "a historic trade agreement that will boost the large-scale resurgence of the U.S. semiconductor industry."
Taiwan's executive branch said the island's companies will invest a special $250 billion in industries such as semiconductors, artificial intelligence (AI) applications, and energy.
Reuters quoted Cheng Li-chun, Deputy Chief Executive of Taiwan's Executive Yuan, as saying: "During these negotiations, we promoted two-way high-tech investment between Taiwan and the U.S., hoping that in the future we can become close strategic partners in AI." Cheng also affirmed that the agreement was "mutually beneficial," and encouraged U.S. investment in Taiwan as well.
Previously, on January 15th, Nikkei Asia reported that TSMC - Taiwan's number one chip manufacturer and the world leader in advanced chip supply - will increase its investment to a record $56 billion by 2026 to accelerate the construction of factories in the US and Taiwan to capitalize on the strong demand for AI and high-performance computing. This investment figure represents a 36.9% increase compared to the $40.9 billion TSMC spent last year.
TSMC Chairman and CEO Wei Zhejia stated that the company will continue to accelerate the construction of advanced chip factories in Arizona. Specifically, TSMC will begin installing chip manufacturing equipment at its second factory in the state and push for official production to begin in the second half of 2027. TSMC is also building a third factory and awaiting permits to begin construction of a fourth factory and its first advanced packaging plant, all in Arizona.
Having more advanced chip manufacturing plants helps the US become more self-sufficient in semiconductor supply - something that is particularly important for the country in the context of the trade war with China.
A double-edged sword?
In an interview with Thanh Nien newspaper on January 16th, Dr. Satoru Nagao stated: "For high-end semiconductors, nearly 90% of the supply depends on Taiwan. In particular, Taiwan's TSMC plays a crucial role. The US desperately needs such resources to produce high-tech machinery, especially weapons. Recently, the application of AI technology has boomed, requiring high-end semiconductor products. Therefore, dependence on Taiwan for semiconductor supply is a risk for the US. Washington wants Taipei to diversify its production locations. This is a way to mitigate risks if mainland China uses military force against Taiwan, which could severely impact the US's semiconductor supply from Taiwan."
However, Dr. Nagao also raised the issue: "For Taiwan, relocating factories is a double-edged sword. On the positive side, locating factories in other countries could be safe and beneficial for Taiwan even if the island is in conflict. But conversely, if the US is no longer dependent on factories in Taiwan, Washington will have less reason to protect Taipei. Perhaps that is why, although accepting Washington's request to relocate factories to the US, Taiwan still retains some important factories that the US depends on."
Source: Thanh Nien Newspaper