Taiwan agrees to $250 billion US chip investment as Washington cuts tariffs

Taiwanese semiconductor companies will invest heavily in US production capacity in exchange for lower tariffs. 

The US and Taiwan have signed a trade agreement requiring Taiwanese chip and tech companies to invest at least $250 billion in American production capacity. Taiwan's government will provide matching credit guarantees, according to the Financial Times and CNBC.

In return, the US is cutting reciprocal tariffs on Taiwanese goods from 20 to 15 percent. Generic drugs, aircraft parts, and raw materials unavailable in the US will remain completely tariff-free. The deal gives Taiwan most-favored-nation status, putting it on equal footing with Japan, South Korea, and the EU.

Quota system ties imports to US production

The agreement includes a complex quota system for chip imports. Companies building new factories in the US can import 2.5 times their planned capacity tariff-free from Taiwan during construction. Once facilities are up and running, that quota drops to 1.5 times actual US production. According to Bernstein analyst Mark Li, TSMC's entire Taiwan export volume would be tariff-free once the company has 40 percent of its capacity in the US.

TSMC, which produces roughly 90 percent of the world's most advanced semiconductors, has already committed to $165 billion in US investments. Volume production started in Arizona for Nvidia and Apple in late 2025. By the early 2030s, 30 percent of the company's most advanced production capacity at 2 nanometers and below should be located in the US.

That number sounds impressive, but according to the Financial Times, it represents only about 10 percent of TSMC's current global capacity. Since the company plans major additional capital investments, that share could actually shrink in the coming years.

Commerce Secretary Howard Lutnick told CNBC that TSMC has acquired hundreds of acres of land next to its existing Arizona site. He left it to the company to explain any further expansion plans. TSMC itself remained cautious, saying all investment decisions are based on market conditions and customer requirements.

100 percent tariff threat looms over non-compliant firms

A clear threat backs up the agreement. Lutnick told CNBC that Taiwanese chip companies that don't build in the US face tariffs of 100 percent. The administration's stated goal is to relocate 40 percent of Taiwan's semiconductor supply chain to the US, with the ultimate aim of making America self-sufficient in semiconductor manufacturing.

The Trump administration imposed sweeping reciprocal tariffs last year but exempted semiconductors, launching a national security investigation instead. The new agreement provides clarity for companies that spent a year uncertain about future tariff policy.

Taiwan's Deputy Premier Cheng Li-chiun emphasized that the investment figure is based on companies' existing expansion plans. The goal isn't to relocate Taiwan's chip industry abroad, she said. Taiwan's parliament, controlled by the opposition, still needs to approve the deal.