US and Taiwan Ink Trade Agreement, Tariffs Cut to 15%

Washington and Taipei have formalized a significant trade agreement, slashing tariffs on Taiwanese exports to the U.S. to 15%, bringing them in line with those applied to key Asian allies like Japan and South Korea. This landmark deal simultaneously opens the U.S. market wider to Taiwanese goods.

Under the terms of the agreement, Taiwan has committed to eliminating or reducing 99% of its tariff barriers on U.S. imports. This includes providing preferential market access for a range of American industrial and agricultural products, notably automobiles, beef, and minerals. Furthermore, Taiwan has pledged to procure over $84 billion in U.S. goods between 2025 and 2029. This substantial commitment encompasses critical items such as liquefied natural gas, crude oil, aircraft, and power generation equipment, underscoring a deepening economic interdependence.

The Office of the U.S. Trade Representative highlighted that Taiwan has agreed to address long-standing non-tariff barriers. A key concession is Taiwan’s acceptance of U.S.-manufactured vehicles that comply with U.S. Federal Motor Vehicle Safety Standards, removing the need for additional Taiwanese regulatory hurdles.

This latest trade pact builds upon the foundational announcement made in January, which saw Taiwanese semiconductor and technology firms pledge a staggering $250 billion investment in U.S. production capacity. This investment is further supported by an equivalent amount of government credit designed to facilitate these expansion efforts by Taiwanese enterprises.

However, the broader U.S.-Taiwanese economic engagement has been complicated by differing strategic visions regarding semiconductor supply chains. A prominent proposal, articulated by Commerce Secretary Howard Lutnick last month, aimed to relocate 40% of Taiwan’s entire semiconductor manufacturing base to the United States. Lutnick had also indicated that Taiwanese chip companies failing to establish operations in the U.S. could face tariffs as high as 100%.

This ambitious relocation plan has met with significant pushback from Taiwan. Taipei’s chief trade negotiator deemed the 40% target “impossible,” emphasizing the deeply entrenched and decades-in-the-making nature of Taiwan’s semiconductor ecosystem. Taiwan’s Vice Premier Cheng Li-chiun further elaborated, stating that the island’s ability to expand internationally, including its investments in the U.S., is contingent upon its core semiconductor industry remaining firmly rooted and continuing to grow within Taiwan. This perspective suggests a strategic focus on leveraging its domestic strength to foster global partnerships, rather than a wholesale migration of its critical infrastructure.

The implications of this trade agreement and the ongoing discussions around semiconductor supply chains are being closely watched by Beijing. China, which views Taiwan as a renegade province, has previously criticized the January agreement, asserting that it would ultimately “drain Taiwan’s economic interests” and allow the U.S. to “hollow out” the island’s most vital industry. Chinese President Xi Jinping has consistently referred to the reunification of Taiwan with the mainland as a “historical inevitability,” a stance vehemently rejected by Taiwan.

In the context of regional security, the U.S. maintains a policy of strategic ambiguity regarding its defense commitments to Taiwan. While not bound by a mutual defense treaty, the 1979 Taiwan Relations Act obligates the U.S. to provide Taiwan with defensive capabilities necessary to maintain its self-defense. This commitment was underscored in December with the approval of an $11.15 billion arms sale to Taiwan, one of the largest such deals, designed to bolster the island’s defenses against increasing threats from China. This sale drew a sharp rebuke from Beijing, with its foreign affairs spokesperson accusing the U.S. of violating the “one-China principle.”