New US–Taiwan Pact Targets Major Shift in Global Chip Production
Washington and Taipei have reached a sweeping trade agreement designed to pull a significant share of advanced chip manufacturing out of Asia and into the United States.
The deal combines massive private investment, government-backed financing, and tariff relief to push Taiwanese technology firms to build and expand operations inside the US.
Key takeaways:
- Taiwanese companies will invest at least $250 billion in US-based chip and tech manufacturing
- Taiwan’s government will back another $250 billion in credit guarantees
- The US will cut tariffs on Taiwanese imports from 20% to 15%, with some categories dropping to zero
- Firms that refuse to build in the US could face tariffs as high as 100%
Under the agreement, Taiwanese semiconductor and technology companies have committed to invest at least $250 billion directly into US manufacturing. In parallel, the government of Taiwan will provide guarantees for an additional $250 billion in credit to support those projects. In exchange, the United States will reduce reciprocal tariffs on Taiwanese goods from 20% to 15%, while eliminating duties entirely on select categories such as generic medicines, pharmaceutical ingredients, aircraft components, and certain raw materials.
US officials say the goal is straightforward: make it more attractive for Taiwan-based firms to manufacture inside America rather than ship high-value products across the Pacific.
TSMC expands its US footprint
The strategy is already taking shape on the ground. Taiwan Semiconductor Manufacturing Company has acquired a large parcel of land next to its existing facilities in Arizona, signaling further expansion. Commerce Secretary Howard Lutnick confirmed that the company recently purchased hundreds of acres adjacent to its current site, opening the door to additional fabrication plants.
TSMC has already poured as much as $40 billion into its Arizona operations, producing advanced chips for major US clients including Apple and Nvidia with support from incentives under the CHIPS Act. Any new factories built by Taiwanese firms will benefit from special exemptions under Section 232 trade rules. During construction, companies will be allowed to import up to 2.5 times their planned capacity without paying tariffs, and once operational, they can still bring in 1.5 times their US output tariff-free.
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These exemptions will also extend to related sectors such as auto parts and wood products, ensuring that qualifying imports remain capped at the lower 15% tariff rate.
The agreement also carries a sharp warning. Taiwanese firms that decline to build or expand in the US could face punitive tariffs as high as 100% on their exports. According to US officials, the aim is to relocate roughly 40% of Taiwan’s semiconductor supply chain to America as quickly as possible.
While companies will still be free to manufacture chips in Taiwan for US customers, staying entirely offshore would come at a steep cost. The policy blends incentives with pressure, using tariff relief as a reward and trade barriers as leverage.
Behind the push lies a growing sense of urgency in Washington. Concerns about a potential disruption to Taiwan’s chip industry — whether from geopolitical tensions or conflict — have underscored how dependent the US economy remains on overseas semiconductor production. With demand for artificial intelligence chips surging, officials argue that domestic capacity is now a matter of economic security.
“We’re moving toward full self-sufficiency in semiconductor manufacturing,” Lutnick said, framing the deal as a decisive step toward reducing long-term risk and securing access to critical technology.
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