The United States and Taiwan have reached a trade agreement to build chips and chip factories on U.S. territory, the Commerce Department announced Thursday.
As part of the agreement, Taiwanese chip and technology companies will invest at least $250 billion in U.S. production capacity, and the Taiwanese government will guarantee these companies $250 billion in credits.
In return, the U.S. will cap “reciprocal” tariffs on Taiwan from 20% to 15%, and promise zero reciprocal tariffs on generic drugs, their ingredients, aircraft parts, and some natural resources.
Commerce Secretary Howard Lutnick told CNBC’s Brian Sullivan in an interview Thursday that Taiwan Semiconductor Manufacturing Co. could buy land and expand into Arizona as part of the deal.
“They just bought several hundred acres of land adjacent to their property,” Lutnick said. “I let them get through the board and give them time.”
A TSMC spokesperson told CNBC: “Regarding TSMC’s plans, market demand for our advanced technology is very strong. We will continue to invest in Taiwan and expand overseas. All investment decisions are based on market conditions and customer demand.”
The announcement added that future tariffs under the Section 232 framework will have some exceptions, including for companies that manufacture chips in the United States and Taiwanese companies that build new chip factories in the United States. TSMC — During the construction of a factory, it will be possible to import up to 2.5 times the production capacity under construction without paying customs duties under this framework.
According to the announcement, Taiwanese auto parts, lumber and related products will also be exempt from tariffs exceeding 15% under Article 232.
Once completed, companies will be able to import 1.5 times their U.S. production capacity, Commerce said.
The agreement provides clarity for semiconductor and technology companies that have grappled with uncertainty over the past year over the Trump administration’s approach to semiconductor industry tariffs.
It also encouraged TSMC, one of the world’s largest fab companies, to continue building more factories in the mainland United States, while making clear that it could continue to make chips for American companies in Taiwan.
“As a semiconductor foundry serving customers around the world, we welcome the prospect of a strong trade agreement between the United States and Taiwan,” TSMC representatives said in a statement.
Lutnick said in an interview that Taiwan-based semiconductor companies that don’t manufacture in the U.S. will likely face 100% tariffs. He said the government’s goal is to bring 40% of Taiwan’s semiconductor supply chain to the United States.
“If we don’t build it in the U.S., the tariffs are likely to be 100%,” Lutnick said.
TSMC has already built a factory in Arizona and has invested $40 billion to produce chips for companies such as: apple and Nvidiausing a previous grant of U.S. government funds under the CHIPS Act.
The U.S. government is prioritizing the production of cutting-edge chips in the United States, as the fight over access to artificial intelligence semiconductors becomes a key geopolitical issue.
U.S. officials also say there is a big risk to the U.S. economy if China invades Taiwan and reduces access to TSMC chips.
“We’re going to put everything in place to be self-sufficient in semiconductor manufacturing capacity,” Lutnick said.
