WASHINGTON: The United States said Thursday (Jan 15) that it has signed a deal with Taiwan to reduce tariffs on goods from the island, while increasing Taiwanese semiconductor and tech companies’ investments in America.
The agreement, the US Commerce Department said, “will drive a massive reshoring of America’s semiconductor sector”.
Under the deal, Washington will lower tariffs on Taiwanese goods to 15 per cent, down from a 20 per cent “reciprocal” rate meant to address US trade deficits and practices it deems unfair.
Taiwanese Premier Cho Jung-tai praised negotiators on Friday for “delivering a well-executed home run”.
“These results underscore that the progress achieved so far has been hard-won,” Cho said.
Sector-specific tariffs on Taiwanese auto parts, timber, lumber and wood products will also be capped at 15 per cent, while generic pharmaceuticals and certain natural resources will face no “reciprocal” duties, the Commerce Department added.
Meanwhile, Taiwanese chip and tech businesses are set to make “new, direct investments totalling at least US$250 billion” in the United States to build and expand capacity in areas like advanced semiconductors and artificial intelligence.
Taiwan will also provide “credit guarantees of at least US$250 billion to facilitate additional investment by Taiwanese enterprises”, to support the growth of the US semiconductor supply chain, the department said.
Taiwan’s government said the new tariff will not stack on top of existing duties, which had been a major concern for local industries.
“Of course, it’s good that the reciprocal tariff has been lowered to 15 per cent – at least it puts us on par with our main competitors South Korea and Japan,” said Chris Wu, sales director for Taiwanese machine tool maker Litz Hitech Corp.
But, given the company’s single-digit profit margins, “there is no way we can absorb the tariff” for US customers, he said.
The department’s announcement did not mention names, but the deal has key implications for Taiwanese chipmaking titan TSMC, the world’s biggest contract maker of microchips used in everything from Apple phones to Nvidia’s cutting-edge AI hardware.
In an interview with CNBC, Commerce Secretary Howard Lutnick said TSMC has bought land and could expand in Arizona as part of the deal.
“They just bought hundreds of acres adjacent to their property. Now I’m going to let them go through it with their board and give them time,” he said.
Taiwanese producers who invest in the United States will also be treated more favourably when it comes to future semiconductor duties, the Commerce Department said.
Firms building new US chip capacity may import up to 2.5 times their planned capacity without paying sector-specific duties during construction. The quota lowers to 1.5 times once projects are completed.
A day prior, US officials held off imposing wider chip tariffs, instead announcing a 25 per cent duty on certain semiconductors meant to be shipped abroad – a key step in allowing Nvidia to sell advanced AI chips to China.
Ryan Majerus, a former US trade official, told AFP that although chip tariffs are currently narrowly targeted, Washington “signalled there is certainly potential for it to grow”.
Majerus, now a partner at law firm King & Spalding, added that the deal had parallels to those with other US partners. The European Union and Japan, for example, both secured a 15 per cent tariff rate.