US and Taiwan near trade deal linking tariff cuts to chipmaking expansion

The United States and Taiwan are close to finalizing a trade deal that cuts tariffs and ties market access to chipmaking expansion inside the U.S., according to the New York Times.

The plan lowers the U.S. tariff rate on goods from Taiwan to 15%, matching the level already applied to imports from Japan and South Korea. The talks have been running for months and are now in legal review.

The agreement links trade relief to concrete investment. Taiwan Semiconductor Manufacturing Corporation would commit to a major buildout in the U.S., centered in Arizona. President Donald Trump has used tariffs since April to press trading partners for domestic investment tied to national security goals.

After the April rollout, rates were adjusted as partners offered projects in areas the administration prioritizes. Japan and South Korea pledged large sums across shipbuilding, nuclear power, electronics, and critical minerals. With Taiwan, the focus stays on chips.

Trump administration cuts tariffs while pressing for US factory buildout

Under the draft terms, the tariff cut brings goods from Taiwan down to 15%, aligning the island with other Asian allies that struck deals last year.

Since August, importers had been paying 20% on most products from Taiwan. Semiconductors and many electronics were exempted from that rate. Officials said those categories would fall under separate national security reviews instead.

The administration has relied on Section 232 to apply tariffs to steel, aluminum, cars, copper, lumber, and other goods. A Section 232 review of semiconductors was expected last year and is run by the Department of Commerce.

That review has not yet produced results. The pause has fueled talk that officials did not want to disrupt a fragile trade truce with China while talks with Taiwan continued.

Security concerns sit behind the push. Taiwan dominates global chip production, especially advanced processors used in computers and the data centers that power artificial intelligence. That concentration carries risk.

Beijing maintains that Taiwan belongs to China and has conducted live fire drills around the island. Officials and executives worry that any conflict could break supply chains for electronics, cars, and military systems.

TSMC expands Arizona footprint as chip trade risks stay in focus

As part of the trade talks between the Trump administration and Taiwan, TSMC has allegedly agreed to build at least five more semiconductor facilities in Arizona, after the company built one plant in 2020 and is planning to finish a second facility scheduled to open in 2028.

Earlier last year, TSMC promised four more plants in the coming years, so this new commitment adds five on top of those plans. The timeline for construction has not been set, according to the NYT.

Semiconductors account for more than one-third of Taiwan’s exports. The most valuable chips come from TSMC and its network of more than 20 factories. Potential chip tariffs pose a direct risk to both the island and the company. That risk shaped the talks.

The Taiwanese government had already concluded trade discussions with the Office of the United States Trade Representative. Talks continued with the Department of Commerce on Section 232 and domestic investment plans. Those discussions ended only after TSMC bought another parcel of land in Arizona to support expansion.

Administration officials have apparently told the NYT that companies that invest inside the U.S. would not be subject to Section 232 tariffs. How that exemption will be applied remains unclear. What is clear is the structure of the deal. Lower tariffs are paired with more factories. For Taiwan, access to the U.S. market comes with a price. For the U.S., chip capacity moves closer to home.

Claim your free seat in an exclusive crypto trading community - limited to 1,000 members.