Trump administration reaches a trade deal to lower Taiwan’s tariff barriers

The Trump administration has secured a major trade agreement with Taiwan, with the island nation agreeing to remove or reduce 99% of its tariff barriers, the U.S. Trade Representative’s office announced Thursday. This landmark deal addresses a significant trade imbalance that reached nearly $127 billion during the first 11 months of 2025, according to Census Bureau data.

Under the new agreement, most Taiwanese exports to the United States will be taxed at a 15% rate, aligning with tariffs imposed on other key U.S. trading partners in the Asia-Pacific region, including Japan and South Korea. The rate represents a substantial reduction from the initially proposed 32% tariff rate.

The signing ceremony was attended by high-level officials from both sides, including U.S. Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick, along with Taiwan’s Vice Premier Li-chiun Cheng and government minister Jen-ni Yang. The agreement was formalized under the auspices of the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office in the United States, reflecting the complex diplomatic relationship between the two entities.

“President Trump’s leadership in the Asia-Pacific region continues to generate prosperous trade ties for the United States with important partners across Asia, while further advancing the economic and national security interests of the American people,” Greer said in a statement following the signing.

Taiwan’s government welcomed the agreement, noting that it establishes a level playing field for Taiwanese companies to compete with those from Japan, South Korea, and the European Union. Officials stated that the deal effectively “eliminated” disadvantages stemming from the previous lack of a free trade agreement between Taiwan and the United States.

The timing of the agreement is particularly significant, coming ahead of President Trump’s planned visit to China in April. It signals a deepening economic relationship between the U.S. and Taiwan, a self-ruled democracy that China claims as its territory. Beijing maintains a policy prohibiting countries with which it has diplomatic relations—including the United States—from having formal ties with Taipei.

Vice Premier Cheng expressed hope that the agreement would position Taiwan as a strategic partner with the U.S. “so as to jointly consolidate the democratic camp’s leading position in high technology.”

The deal is expected to benefit U.S. exporters of automobiles, pharmaceutical drugs, and food products by easing their access to Taiwanese markets. However, perhaps the most critical component is Taiwan’s commitment to invest in U.S.-based computer chip production facilities, which could help address the existing trade imbalance.

In a parallel agreement, Taiwan has committed to $250 billion in investments across various U.S. industries, including semiconductor manufacturing, artificial intelligence applications, and energy. The Taiwanese government has also pledged up to an additional $250 billion in credit guarantees to support smaller businesses investing in the United States. These substantial investment commitments were instrumental in securing the reduced 15% tariff rate.

Taiwan’s President Lai Ching-te told reporters in Taipei that while Taiwan had agreed to reduce tariffs on U.S. imports, the rates on 93 specific items would remain unchanged to protect vital agricultural and industrial sectors, particularly rice farming.

The U.S. Commerce Department described the agreement in January as “a historic trade deal that will drive a massive reshoring of America’s semiconductor sector.” As part of the arrangement, the U.S. will provide Taiwan with preferential treatment regarding potential tariffs resulting from a Section 232 investigation concerning imported computer chips and semiconductor manufacturing equipment.

Taiwan Semiconductor Manufacturing Company (TSMC), the global chip-making giant, is expected to be the primary investor, with a commitment of $165 billion in U.S. investments. These funds will support not only fabrication plants but also a major research and development center aimed at building a supply chain to power U.S. artificial intelligence ambitions. Major U.S. technology companies such as Nvidia and AMD rely heavily on TSMC for manufacturing advanced chips.

When questioned about whether these investments might undermine Taiwan’s technological leadership, President Lai reassured that Taiwan’s position remains secure as long as research and development centers, advanced manufacturing processes, and the largest production volumes remain in Taiwan.

Both sides emphasized that the investments will flow in both directions, with U.S. companies also investing in key Taiwanese industries. Nvidia, for example, recently signed a land deal in Taipei to establish a headquarters there, underscoring the reciprocal nature of the economic relationship.

The trade agreement now awaits approval from Taiwan’s legislature before it can be fully implemented.