U.S. Locks in Major Chip Deal With Taiwan as Tech Rivalry With China Intensifies

The United States has struck a sweeping trade and investment deal with Taiwan, easing tariffs on the chip powerhouse in exchange for up to $250 billion in Taiwanese investments—a move with far-reaching economic and security implications as pressure from China grows.

The agreement mirrors similar deals Washington reached last year with Japan, Europe, and China, rolling back trade duties imposed during President Donald Trump’s renewed push to reduce trade deficits and revive U.S. manufacturing.

Why It Matters

The deal delivers much-needed relief for Taiwanese exporters while advancing Washington’s efforts to bring critical technology production especially semiconductors back onto U.S. soil. That push gained urgency during the COVID-19 pandemic, which exposed vulnerabilities in global supply chains.

Taiwan produces about 60 percent of the world’s semiconductors and more than 90 percent of advanced chips, including those essential to artificial intelligence and modern weapons systems placing it at the heart of the U.S.-China technology rivalry.

What to Know

The agreement was signed Thursday by Taiwan’s de facto embassy in Washington and the American Institute in Taiwan, which manages unofficial U.S.-Taiwan relations, according to the Commerce Department.

Taiwanese President Lai Ching-te hailed the deal as a “landmark agreement,” saying it would deepen economic integration, expand high-tech cooperation, and boost two-way investment across key industries.

Under the deal:

• Taiwanese chipmakers, including TSMC, will invest at least $250 billion to expand U.S. production of advanced chips, clean energy technologies, and AI.
• Taiwan will provide an additional $250 billion in credit guarantees to support Taiwanese firms building out the U.S. chip ecosystem.
• The two sides will jointly develop “world-class” industrial parks in the United States to strengthen America’s role as a global manufacturing and innovation hub.

In return, U.S. tariffs on Taiwanese goods will be capped at 15 percent, while aircraft components and generic pharmaceuticals will face zero tariffs. National-security tariffs under Section 232 on products such as lumber and auto parts will also be reduced.

The U.S. currently accounts for just 10 percent of global wafer fabrication, down sharply from 37 percent in 1990, highlighting the scale of Washington’s effort to rebuild domestic capacity.

China Pushes Back

Beijing reacted swiftly. Chinese Foreign Ministry spokesperson Guo Jiakun said China “firmly opposes” any agreement with “official or sovereign implications” between Taiwan and countries that maintain diplomatic ties with China.

What People Are Saying

Rep. Chris Smith of New Jersey said Taiwan’s investment comes at a pivotal moment in the race for technological dominance with China, calling it a major boost to U.S. competitiveness.

But David Sacks, a fellow at the Council on Foreign Relations, warned the deal could raise long-term security concerns for Taipei. If the U.S. succeeds in bringing advanced chip production home, he said, Washington may feel less compelled to defend Taiwan against potential Chinese aggression.

What Happens Next

China claims Taiwan as its territory and has vowed to reunify the island by force if necessary. Although the U.S. does not formally recognize Taiwan as a sovereign state, it remains its primary arms supplier and has long relied on “strategic ambiguity” to deter Beijing.

That policy has come under strain over the past year, particularly after President Trump accused Taiwan of “stealing” America’s chip industry and suggested the island should pay for U.S. protection.

Trump has said Chinese President Xi Jinping assured him that China would not act against Taiwan during his second term.

“I would be very unhappy if he did that,” Trump told The New York Times last week. “I don’t think he will but I hope he doesn’t.”