The United States and Taiwan have finalized a significant trade agreement announced on January 15, 2026, centered on semiconductors, aimed at bolstering U.S. domestic chip manufacturing while reducing tariffs on Taiwanese goods.
According to the U.S. Commerce Department, the deal directs at least $250 billion in new direct investments by Taiwanese semiconductor and technology firms into U.S. production of advanced chips, energy, and artificial intelligence, supplemented by $250 billion in Taiwanese government credit guarantees.
In return, broad tariffs on most Taiwanese exports to the U.S. drop from 20% to 15%, with preferential treatment—including duty-free imports—for chipmakers expanding U.S. facilities. U.S. Commerce Secretary Howard Lutnick described the pact as a step to relocate up to 40% of Taiwan’s chip supply chain to America, emphasizing national security and economic resilience amid reliance on foreign semiconductors.
Tariff Reductions and Investment Incentives The agreement offers targeted relief: Taiwanese chip producers like TSMC expanding in the U.S. (including ongoing Arizona projects) can import up to 2.5 times their new capacity duty-free during construction phases, with lower rates for excess.
General tariffs fall to 15% across most goods, while generics pharmaceuticals, aircraft components, and certain natural resources face 0% duties. Auto parts, timber, and wood products are capped at 15%.
These measures reward U.S. investments and provide predictability, with the U.S. committing not to treat Taiwan worse than other partners in future tariff scenarios. The deal, signed via the American Institute in Taiwan and Taipei Economic and Cultural Representative Office, requires Taiwanese parliamentary review.
Strategic Implications for Supply Chains and Geopolitics The pact addresses U.S. concerns over vulnerability in advanced chip production, dominated by Taiwan’s TSMC, by incentivizing “reshoring” to create jobs and secure supply for AI, defense, and consumer tech.
Lutnick stressed on CNBC that Taiwan must align with U.S. priorities for protection, given China’s claims over the island. Market reactions included gains for chip equipment firms like ASML, Lam Research, and Applied Materials (up 4-6%), while Nvidia rose over 2%. The deal risks heightening tensions with Beijing, which views deepening U.S.-Taiwan ties as provocative, but supports global supply chain diversification and U.S. technological leadership in an era of strategic competition.