U.S. signs trade deal with Taiwan, lowering tariffs to 15%, while Taipei to boost American goods purchases

• Taiwan will provide preferential market access for U.S. industrial and agricultural exports including autos, beef products, and minerals, and will accept U.S. vehicles built to U.S. safety standards without additional requirements
• The deal follows commitments by Taiwanese chip companies to invest at least $250 billion in U.S. production capacity, though Taiwan has pushed back on U.S. proposals to relocate 40% of its semiconductor supply chain
• China criticized the agreement, claiming it exploits Taiwan's key semiconductor industry, while the deal comes amid ongoing tensions over Taiwan's status and U.S. arms sales to the island worth billions of dollars

Summary: U.S.-Taiwan Trade Deal

Key Agreement Terms:

The U.S. and Taiwan signed a comprehensive trade deal reducing U.S. tariffs on Taiwanese exports to 15%, matching rates applied to Japan and South Korea. In reciprocity, Taiwan will eliminate or reduce 99% of tariff barriers on U.S. goods and provide preferential market access for American industrial and agricultural products, including automobiles, beef, and minerals.

Financial Commitments:

Taiwan has committed to purchasing over $84 billion in U.S. goods between 2025-2029, focusing on energy products (LNG and crude oil), aircraft, and power equipment. Additionally, Taiwanese chip and technology companies previously pledged at least $250 billion in U.S. production capacity investments, backed by equivalent government credit.

Semiconductor Tensions:

The deal addresses ongoing semiconductor supply chain negotiations, with the U.S. seeking to relocate 40% of Taiwan's semiconductor supply chain domestically. Taiwan has resisted this proposal, with Vice Premier Cheng Li-chiun arguing the decades-old ecosystem cannot be simply relocated. Non-compliant Taiwanese chip companies face potential 100% tariffs.

Non-Tariff Barriers:

Taiwan agreed to resolve longstanding non-tariff barriers, including accepting U.S. vehicles built to Federal Motor Vehicle Safety Standards without additional requirements.

Geopolitical Context:

China strongly opposed the deal, claiming it undermines Taiwan's key industries. Beijing considers Taiwan part of its territory, with President Xi Jinping regarding reunification as "inevitable." The U.S. recently approved substantial arms sales to Taiwan in December, drawing sharp criticism from Beijing over violations of the "one-China principle."

Market Implications:

The agreement strengthens U.S.-Taiwan economic ties while escalating U.S.-China tensions, with significant implications for global semiconductor supply chains and bilateral trade flows.