By Trevor Hunnicutt
WASHINGTON, Jan 15 (Reuters) – The U.S. and Taiwan clinched a trade deal on Thursday that cuts tariffs on many of the semiconductor powerhouse’s exports, directs new investments in the U.S. technology industry and risks infuriating China.
The deal deepens the Trump administration’s ties with Taipei at a critical time as China ratchets up pressure on the island and Washington has worked to avoid an all-out trade war with Beijing.
Under the long-negotiated deal, Taiwanese chipmakers like TSMC that expand U.S. production will get a lower tax rate for semiconductors they import into the U.S. The U.S. will also lower a set of broad tariffs that apply to most other Taiwanese exports to the U.S. from 20% to 15%. Generic pharmaceuticals, aircraft components and “unavailable natural resources” will face a 0% tariff, the Commerce Department said.
In exchange, Taiwanese technology companies, such as TSMC, will make investments totaling at least $250 billion to increase production of semiconductors, energy and artificial intelligence in the United States. That includes $100 billion already committed by TSMC in 2025, with more to come, according to U.S. Commerce Secretary Howard Lutnick.
Taiwan will also guarantee another $250 billion in credit to make additional investments possible, the Trump administration said.
The investment boost in chip production will likely provide more business for TSMC’s major suppliers, which include major chip manufacturing toolmakers such as ASML, Lam Research and Applied Materials. It should also provide a boost to smaller materials suppliers of chemicals and materials such as Sumitomo Corp and DuPont spinoff Qnity Electronics. Many of those firms have long had a presence in Arizona due to Intel’s major operations there but have expanded facilities with TSMC’s arrival.
Shares of chip company Nvidia, which depends on TSMC for manufacturing, rose more than 2%, keeping most of its gains from earlier in the day.
TAIWAN’S SEMICONDUCTOR POWERHOUSE SET TO EXPAND IN U.S.
Under the agreement, chipmakers that expand in the U.S. will be able to import up to 2.5 times their new capacity of semiconductors and wafers with no extra tariffs during an approved construction period, with preferential treatment on chips that exceed that quota.
Meanwhile, chipmakers that have already built chip production plants in the U.S. can import 1.5 times their new U.S. production capacity without paying additional tariffs.
U.S. President Donald Trump on Wednesday imposed a 25% tariff on certain AI chips, such as the Nvidia H200 AI processor, but he left most other chips untouched, for now.
