Taiwan to invest $250 billion in the U.S. semiconductor industry in exchange for lower tariffs

In brief:

• Taiwan will invest at least $250 billion in semiconductor production in the United States.
• Washington lowers tariffs on Taiwanese products from 20% to 15%.
• The U.S. aims to reduce strategic dependence on Asia for advanced chips.
• Beijing condemns the agreement, calling it a violation of the “One China” principle.
• Taiwan maintains its central role in global chip production, especially for AI.

Massive investments for strategic independence

Taiwan is set to invest heavily in the United States to develop semiconductor production, a move designed to reduce Washington’s strategic dependence, in exchange for a reduction in tariffs imposed on the island, U.S. officials announced Thursday.

“We need these semiconductors for our national security, and they must be produced in the United States,” said U.S. Secretary of Commerce Howard Lutnick in an interview with CNBC, following months of bilateral negotiations.

“We cannot rely on a country nearly 15,000 km away to supply products essential to our national security,” he added, emphasizing the goal of making the U.S. “self-sufficient” in this critical sector.

The agreement calls for Taiwanese semiconductor companies to invest at least $250 billion in the U.S. to develop production, particularly of advanced chips. In addition, another $250 billion in credit guarantees will be provided to strengthen the U.S. semiconductor ecosystem and supply chain.

“Our goal is to bring 40% of Taiwan’s semiconductor supply chain to the United States,” Lutnick declared.

Taiwan’s role in global chip production

Taiwan manufactures more than half of the world’s chips, and nearly all of the most advanced ones, used in everything from smartphones to AI data centers. This dominance is considered a “silicon shield” for the island’s security, protecting it from potential blockades or invasions by communist China which claims Taiwan as part of its territory and encouraging the United States to come to its defense.

According to Taiwan’s Minister of Economic Affairs Kung Ming-hsin, “Taiwan is expected to remain the world’s leading producer of AI semiconductors, both for Taiwanese companies and globally.”

Tariffs and trade concessions

In return for this industrial support, U.S. tariffs on Taiwanese products—including sectoral items such as automotive parts, furniture, and construction timber—will not exceed 15%, down from at least 20%. This puts Taiwan on equal footing with products from Europe and Japan, which are also covered by recent trade agreements. Generic drugs, raw materials not available in the U.S., and aviation components will remain duty-free.

Taiwanese Prime Minister Cho Jung-tai praised the deal as a “hard-won agreement” and congratulated negotiators for achieving a “masterstroke.”

Beijing’s strong opposition

China has expressed firm opposition to the deal, calling it a violation of the “One China” principle. Guo Jiakun, a spokesperson for China’s Ministry of Foreign Affairs, urged the United States to “strictly respect the One China principle,” noting that Beijing considers Taiwan part of its sovereign territory.

“This agreement has implications for sovereignty and official relations,” Guo said, “and we resolutely oppose any such deals between countries and the Taiwan region.”

Strategic implications

The U.S.-Taiwan deal not only strengthens American semiconductor independence but also reinforces Taiwan’s central role in the global tech supply chain. It represents a major step in securing both countries’ interests in advanced technology, AI, and national security, while heightening geopolitical tensions with China.