US cuts Taiwan tariffs to 15% in fresh trade agreement

The U.S. has entered into a trade agreement with Taiwan, with the U.S. cutting tariffs from 20% to 15%  and Taiwan pledging to remove 99% of its tariff barriers. The United States Trade Representative’s (USTR) office notes that the 15% rate is applied to other U.S. trading partners in the Asia-Pacific region, such as South Korea and Japan.

According to Trade Representative Jamieson Greer, President Donald Trump’s leadership in the Asia-Pacific region continues to foster prosperous trade ties between the U.S. and important partners across Asia. The Census Bureau also observes that the deal comes as the U.S. remains reliant on Taiwan for its computer chip production, which contributed to a trade imbalance of roughly $127 billion during the first 11 months of 2025.

Meanwhile, the Taiwanese government has stated that the tariff rate set in the deal allows its companies to compete on a fair playing field with the EU, Japan, and South Korea. The agreement eliminates the disadvantage of a lack of a free trade agreement between the U.S. and Taiwan. It would also allow the U.S. to sell food products, autos, and pharmaceuticals to Taiwan, potentially helping ease the trade imbalance.

Taiwan to make $250B investments in U.S. industries

The Taiwanese government has unveiled plans to invest up to $250 billion in U.S. industries, including energy, semiconductor chips, and AI applications. In the separate but related deal, Taiwan also says it will provide an additional $250 billion in credit guarantees to help smaller companies invest in the United States. Taiwan’s government will submit the reciprocal trade deal and investment plans to its legislature for approval. 

On the other hand, the agreement suggests a deepening economic relationship between the U.S. and Taiwan and also comes ahead of Trump’s planned visit to China in April. However, Beijing prohibits all countries with which it maintains diplomatic relations, including the U.S., from having formal ties with Taipei.

Meanwhile, the United States said the deal with Taiwan will help establish a few world-class industrial parks in America to build domestic manufacturing capacity for advanced technologies, such as semiconductor chips. The U.S. Commerce Department previously described it as a historic trade agreement that will drive a massive reshoring of America’s chip sector. TSMC, Taiwan’s chip-making giant, is expected to be one of the key investors, committing up to $165 billion in U.S. investments. 

Taiwan also said the investments will be two-way, with U.S. firms also investing in key Taiwanese industries. Major U.S. tech firms such as AMD and Nvidia rely on TSMC for manufacturing semiconductor chips. Meanwhile, Nvidia also signed a land deal in Taipei this week to build a headquarters office there.

AI boom turbocharges Taiwan’s economy ahead of latest trade deals

The frenzy over AI and a surge of semiconductor chip shipments to the U.S. turbocharged Taiwan’s export-focused economy ahead of the latest trade deals. The country’s economy expanded at an annual rate of 8.6% last year, the fastest pace in 15 years, and the strongest growth rate since 2010. 

The advanced estimates released by Taiwan’s statistics agency late last month were better than what the country’s economists had projected. Meanwhile, the new trade deal is expected to boost exports, further powering the economy in 2026, according to the economists. Taiwan’s exports climbed nearly 35%, while shipments to the U.S. surged 78% in 2025.

According to a recent statement from Bank of America economists Helen Qiao and Xiaoping Pi, AI-related demand is expected to continue underpinning Taiwan’s export performance into this year. The surge in AI-related demand is also expected to support the country’s overall economic growth amid sustained global AI investment. 

The AI boom has also propelled Taiwan’s tech firms to record revenues and profits. However, the country’s economists note that growth is likely to slow this year, as Taiwan builds on a high base. Deutsche Bank estimates Taiwan’s economy will grow 4.8% in 2026.

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