Taiwan Pledges $250 Billion for U.S. Chip Manufacturing Amid New Trade Pact

**US and Taiwan Forge Landmark Semiconductor Alliance to Bolster American Chip Manufacturing**

In a significant move to reshape the global semiconductor landscape, the United States and Taiwan have finalized a comprehensive trade agreement aimed at dramatically expanding chip production and factory construction on American soil. The Department of Commerce announced the accord Thursday, marking a pivotal moment in efforts to secure a domestic supply chain for critical technology.

Under the terms of the agreement, Taiwanese semiconductor and technology firms are set to commit a staggering $250 billion in investments towards building new production capabilities within the U.S. This substantial capital infusion will be further supported by the Taiwanese government, which will guarantee an equivalent $250 billion in credit for these companies, facilitating their expansion into the United States.

In return for this significant commitment to U.S. manufacturing, the United States will implement preferential tariff policies for Taiwan. Specifically, “reciprocal” tariffs will be capped at 15%, a reduction from the previous 20% rate. Furthermore, the U.S. will commit to zero reciprocal tariffs on a range of vital goods, including generic pharmaceuticals and their essential ingredients, aircraft components, and certain natural resources.

Commerce Secretary Howard Lutnick disclosed in an interview that Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chip manufacturer, has already acquired significant landholdings adjacent to its existing operations in Arizona, signaling a potential major expansion as part of this new trade pact. “They just bought hundreds of acres adjacent to their property,” Lutnick stated, adding that the company would be given time to finalize plans with its board.

The agreement also introduces favorable tariff treatment for companies actively investing in U.S. chip fabrication. Under the Section 232 framework, Taiwanese companies constructing new semiconductor fabrication plants (fabs) in the U.S. will be permitted to import up to 2.5 times their U.S. production capacity without incurring tariffs during the construction phase. This provision is designed to alleviate the initial cost burdens associated with establishing large-scale manufacturing facilities.

Beyond semiconductors, the agreement extends tariff relief to other key Taiwanese exports. Auto parts, lumber, and related products originating from Taiwan will also benefit from tariffs not exceeding 15% under Section 232.

Once these new U.S.-based factories are operational, companies will be allowed to import up to 1.5 times their U.S. production capacity, according to the Department of Commerce. This phased approach aims to support both the construction and ongoing operational needs of these advanced manufacturing facilities.

This landmark agreement provides much-needed clarity and stability for semiconductor and technology firms that have navigated considerable uncertainty surrounding U.S. tariff policies over the past year. It offers a strong incentive for companies like TSMC to further invest in and expand their manufacturing footprint within the United States, while also affirming the continued importance of their production capabilities in Taiwan for serving global markets.

Lutnick emphasized the administration’s strategic objective: to repatriate approximately 40% of Taiwan’s semiconductor supply chain to the United States. He indicated that Taiwanese chip companies choosing not to invest in U.S. manufacturing could face significantly higher tariffs, potentially reaching 100%. “That’s what they get if they don’t build in America, the tariff’s likely to be 100%,” Lutnick said.

This initiative builds upon existing U.S. efforts to bolster domestic semiconductor production, including the CHIPS Act, which has already supported significant investments by companies like TSMC in Arizona. These fabs are crucial for supplying advanced chips to major U.S. technology giants such as Apple and Nvidia.

The U.S. government has identified the production of leading-edge semiconductors as a national security priority, particularly in light of the escalating global competition for advanced computing capabilities essential for artificial intelligence. U.S. officials have also voiced concerns about the potential economic ramifications should geopolitical tensions lead to any disruption in the supply of TSMC chips.

“We’re going to bring it all over so we become self-sufficient in the capacity of building semiconductors,” Lutnick concluded, underscoring the administration’s vision for a more resilient and domestically controlled semiconductor manufacturing ecosystem.