The United States and Taiwan have finalized a sweeping new trade and investment agreement that promises to dramatically reshape the global semiconductor industry and strengthen economic ties between the two allies amid rising geopolitical tensions.
Announced by the U.S. Department of Commerce on January 15, 2026, the deal commits Taiwanese semiconductor and technology companies to at least $250 billion in direct investments to expand chip production capacity on American soil. Complementing this massive capital infusion, the Taiwanese government will back these efforts with an additional $250 billion in credit guarantees, bringing the total financial commitment to half a trillion dollars. The funds will support not only advanced chip fabrication facilities but also related energy infrastructure and artificial intelligence development, creating large-scale industrial clusters and technology parks across the United States.
In return for these unprecedented investments, the U.S. government has agreed to a more favorable tariff structure for Taiwanese exports. Reciprocal tariffs on most Taiwanese goods will be capped at 15%—a reduction from previously discussed higher levels—while certain strategic and essential products will face zero reciprocal tariffs. This includes generic pharmaceuticals and their active ingredients, aircraft components, and select natural resources that are difficult to source domestically. Under Section 232 national security provisions, Taiwanese auto parts, lumber, and related products will also be protected from tariffs exceeding 15%.
The agreement offers particularly generous incentives for companies building new chip factories (fabs) in the United States. During the construction phase, Taiwanese firms can import up to 2.5 times their planned U.S. production capacity without incurring Section 232 duties. Once the facilities are operational, they may continue importing up to 1.5 times their domestic output duty-free. These exemptions are designed to ease the transition period and ensure that U.S.-bound supply chains remain stable while new domestic capacity comes online.
Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading contract chipmaker, stands to benefit significantly. TSMC already operates major fabrication sites in Arizona—built with roughly $40 billion in investments partially funded by the U.S. CHIPS and Science Act—and has recently acquired hundreds of additional acres adjacent to its existing property, signaling potential further expansion. Commerce Secretary Howard Lutnick highlighted these developments during a CNBC interview, emphasizing that the deal provides long-term clarity for companies navigating tariff uncertainty.
Lutnick also delivered a clear message to Taiwanese chipmakers: those that invest heavily in U.S. production will enjoy preferential treatment, while companies that choose not to build stateside could face tariffs as high as 100% on their semiconductors. The administration’s stated goal is to relocate approximately 40% of Taiwan’s semiconductor supply chain to American territory, reducing vulnerability to potential disruptions—especially in light of ongoing concerns about Chinese military pressure on the island.
This agreement arrives at a pivotal moment. The United States has seen its share of global wafer fabrication capacity plummet from 37% in 1990 to less than 10% today, leaving the country heavily reliant on East Asian suppliers for the advanced chips that power smartphones, electric vehicles, data centers, military systems, and artificial intelligence. Officials have repeatedly warned that any conflict involving Taiwan could cripple access to these critical components, threatening both the economy and national security.
By channeling massive Taiwanese capital into American manufacturing, the pact aims to reverse decades of offshoring and rebuild domestic leadership in leading-edge semiconductor technology. At the same time, it deepens strategic and economic cooperation between Washington and Taipei, offering Taiwan tariff predictability and continued access to the world’s largest market while reinforcing mutual interests in a stable, diversified global supply chain.
As details of implementation emerge in the coming months, this landmark $500 billion partnership could mark one of the most significant realignments of the semiconductor industry in decades—creating high-tech jobs in the United States, bolstering supply-chain resilience, and sending a strong signal about the future of U.S.-Taiwan economic relations in an increasingly contested technological landscape.