U.S. and Taiwan Strike Deal on Tariffs and AI Chips

Quick overview

The Asian island is a global leader in this sector, and the United States is now seeking to integrate part of its production in order to achieve self-sufficiency.

Taiwan has reached an agreement with the United States that will reduce tariffs on its artificial intelligence (AI) chips and increase investment in U.S. territory. Through this deal, Washington secures a key ally in the production of these technologies, which currently dominate discussions among global investors.

How Taiwn is Dealing with Politics

The Asian island—one of the world’s largest chip producers—has long been described as a “Silicon Shield,” as its strategic importance incentivizes the United States to protect this democratic territory from a potential invasion or blockade by China, which claims Taiwan as its own.

Despite threats from Beijing, Taiwan’s Minister of Economic Affairs, Kung Ming-hsin, stated: “Under current planning, Taiwan will remain the world’s most important producer of artificial intelligence chips.” In response to the announcement, China said it “firmly and consistently opposes any agreement that carries implications related to sovereignty or official relations.”

The agreement must still be approved by Taiwan’s parliament, where lawmakers have already expressed widespread concern that the island could lose control over the sector and cede ground to the United States.

Details of the U.S.–Taiwan agreement

Under the agreement’s terms, the United States will lower tariffs on Taiwanese goods to 15%, down from the current 20% applied reciprocally to address the U.S. trade deficit. Production capacity for advanced AI chips will be split between Taiwan and the United States at an 85–15 ratio by 2030, shifting to 80–20 by 2036, according to official projections.

The U.S. Department of Commerce said Taiwanese semiconductor and technology firms will make “new direct investments totaling at least US$250 billion” to expand capacity in advanced chips and AI-related manufacturing within the United States.

In addition, the U.S. government confirmed that sector-specific tariffs on Taiwanese auto parts, lumber, and wood products will also be capped at 15%, while generic pharmaceuticals and certain natural resources will be exempt from “reciprocal” tariffs.

“Our goal is to bring 40% of Taiwan’s entire supply chain and production to the United States (…) We’re going to bring it all here, so we can be self-sufficient in semiconductor manufacturing,” U.S. Commerce Secretary Howard Lutnick said.

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Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.

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