（Singapore, 16.01.2026）The United States and Taiwan have reached a long-awaited trade agreement that lowers tariffs on Taiwanese goods and sharply increases Taiwanese investment in America’s technology sector. The deal, announced on Thursday (Jan 15), puts semiconductor chips at the center of closer economic ties between Washington and Taipei, while also adding a new layer of complexity to U.S.-China relations.
Under the agreement, broad U.S. tariffs on most Taiwanese exports will be reduced from 20% to 15%, bringing Taiwan in line with countries such as Japan and South Korea, which signed similar arrangements with the U.S. last year. Certain products, including generic pharmaceuticals, aircraft components and some natural resources that are not readily available in the U.S., will face zero tariffs.
The biggest focus of the pact is semiconductors, an industry where Taiwan plays a dominant global role. Taiwanese chipmakers that expand manufacturing in the United States will enjoy significantly lower tariffs on the chips, equipment and related products they import into the country. During approved construction periods, companies will be allowed to import up to 2.5 times their new production capacity tariff-free. Even after new factories are completed, preferential treatment will still apply, although the quota will be reduced.
At the heart of the agreement is Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker and a key supplier to major U.S. technology firms. As part of the deal, Taiwanese companies will invest at least $250 billion directly into U.S. industries such as semiconductors, energy and artificial intelligence. That figure includes $100 billion already committed by TSMC in 2025. In addition, Taiwan will provide another $250 billion in credit guarantees to help fund further investment, particularly by small and medium-sized firms building operations in the U.S.
U.S. Commerce Secretary Howard Lutnick said the goal is to bring as much as 40% of Taiwan’s chip supply chain and production to American soil. He was blunt about the alternative, warning that companies choosing not to build in the U.S. could face tariffs as high as 100%. “If they don’t build in America, the tariff’s likely to be 100%,” he said in a television interview.
The announcement comes as Washington increasingly views computer chips as a national security issue. While semiconductors were invented in the U.S. and many are still designed there, the most advanced chips are often manufactured overseas, especially in Taiwan. These components are essential for everything from smartphones and data centers to artificial intelligence systems and advanced military equipment. Reducing dependence on foreign chip supplies has become a top priority for U.S. policymakers.
The deal is also expected to benefit a wide range of companies connected to the semiconductor supply chain. Major equipment makers such as ASML, Lam Research and Applied Materials are likely to see increased demand as new factories are built. Suppliers of chemicals and materials, including Japan’s Sumitomo Corp and DuPont spinoff Qnity Electronics, could also gain more business.
Many of these firms already have operations in Arizona, where Intel has long maintained a strong presence. TSMC has been expanding its own footprint in the state, enlarging an existing plant and planning additional facilities. On Thursday, TSMC reported a stronger-than-expected 35% jump in fourth-quarter profit, underscoring the strong demand for advanced chips driven by artificial intelligence. Chief Executive C.C. Wei said the company is applying for permits to begin construction on a fourth factory in Arizona, as well as its first advanced packaging plant in the U.S.
Financial markets reacted positively to the news. Shares of Nvidia, which relies heavily on TSMC for manufacturing, rose more than 2%. Stock prices for ASML, Lam Research and Applied Materials also climbed, reflecting expectations of higher orders linked to expanded U.S. chip production.
Beyond economics, the agreement has clear geopolitical implications. China considers Taiwan part of its territory, a claim rejected by Taipei. The U.S. does not formally recognize Taiwan as a country but maintains close unofficial ties and is the island’s most important arms supplier. By deepening trade and investment links with Taiwan, Washington risks angering Beijing at a time when it is also trying to avoid a full-scale trade war with China.
Taiwanese officials said the U.S. has assured them that Taiwan will be treated no worse than other countries if semiconductor tariffs are raised in the future. The framework also caps U.S. tariffs on Taiwanese auto parts, timber and wood products at 15%, providing more certainty for exporters.
The deal still faces some uncertainty. It is subject to review by Taiwan’s parliament, and a pending U.S. Supreme Court decision could limit the president’s authority to impose broad tariffs without congressional approval. If the court rules against that authority, it could affect not only the Taiwan agreement but other trade deals as well.
For now, however, the pact removes a major source of uncertainty for Taiwan’s export-driven economy, which has boomed on the back of strong global demand for chips and AI-related hardware. Taiwan recently raised its economic growth forecast for 2025 to around 7.3%, its fastest pace in more than a decade. With tariffs falling and investment flowing, the new U.S.-Taiwan trade deal is set to play a key role in shaping the future of the global semiconductor industry.
