US, Taiwan reach USD 250 billion agreement, cutting tariffs on Taiwanese imports

The United States and Taiwan signed a major trade agreement on Thursday that reduces tariffs on Taiwanese goods and secures USD 250 billion in investments into the US technology sector , including semiconductors , artificial intelligence , and energy .

The deal highlights the growing strategic and economic relationship between the US and Taiwan, with Washington viewing the island as a critical technology partner in the Asia-Pacific region . The agreement comes amid a one-year trade truce with China , aimed at stabilizing relations with the world’s second-largest economy. Despite this, tensions remain high, particularly over Taiwan’s political status , and the deal drew immediate criticism from Beijing , which called it “an economic plunder” and reiterated its opposition to foreign engagement with Taiwan.

Under the agreement, tariffs on Taiwanese goods will drop from 20 per cent to 15 per cent, aligning them with US trade partners such as Japan and South Korea . The US Department of Commerce said the pact establishes an “economic partnership,” creating US-based industrial parks to boost domestic production and reshape the semiconductor industry . Certain imports, including generic pharmaceuticals and aircraft components from Taiwan, will be exempted from tariffs, and Taiwanese semiconductor firms investing in the US will receive preferential treatment.

Leading the investment surge is Taiwan Semiconductor Manufacturing Corporation TSMC , the world’s largest chipmaker, which reported a 35 percent jump in net profit for the October to December quarter at 506 billion new Taiwan dollars, about USD 16 billion, driven by the AI boom , while revenue rose 21 percent to over 1.046 trillion new Taiwan dollars, roughly USD 33 billion. Riding this momentum, TSMC plans to raise capital expenditure to USD 52 to 56 billion in 2026, including nearly USD 165 billion for US based projects such as new fabrication plants in Arizona aimed at creating an advanced chip manufacturing cluster. This expansion, however, presents a curious strategic dilemma , as shifting critical semiconductor production to US soil potentially weakens the long cited argument that Washington must defend Taiwan primarily to safeguard global chip supplies, blurring the link between Taiwan’s security and America’s economic interests and raising questions about how this evolving industrial strategy could reshape US commitments toward Taiwan.

TSMC’s Taiwan-listed shares have surged 59 per cent over the past year, making it Asia’s most valuable listed company with a market capitalization of roughly USD 1.4 trillion, surpassing Samsung Electronics and Alibaba . Other tech giants including Microsoft , Meta , and Alphabet are also investing heavily in AI infrastructure, reflecting strong demand in the sector. TSMC executives expressed confidence in sustained demand, with CEO C.C. Wei noted, “AI is real. Not only real, but it's starting to grow into our daily life.”

The agreement is expected to strengthen US-Taiwan economic ties , expand technology supply chains , and reshape the US tech landscape, even as geopolitical tensions over Taiwan and the Asia-Pacific region remain high. Analysts say the deal underscores the United States’ commitment to Taiwan as a strategic partner, balancing economic collaboration with caution amid Chinese objections.