A new US-Taiwan trade agreement puts semiconductor investment at the center of tariff policy. Under the deal, Taiwanese chip and tech companies are required to invest at least $250 billion in American production capacity, while Taiwan's government will provide matching credit guarantees, according to the Financial Times and CNBC.
The arrangement is designed around a simple trade-off: more production capacity in the US in exchange for lower tariffs on Taiwanese goods. It also creates a quota structure that rewards companies for building in America and threatens steep tariffs for those that do not.
What the deal changes
The US is cutting reciprocal tariffs on Taiwanese goods from 20 to 15 percent. Some categories will remain completely tariff-free, including generic drugs, aircraft parts, and raw materials unavailable in the US.
The agreement also gives Taiwan most-favored-nation status. That places Taiwan on equal footing with Japan, South Korea, and the EU under the terms described in the deal.
For Taiwan's technology sector, the larger issue is not only the lower tariff rate. The agreement directly links future tariff treatment to where companies choose to build production capacity. That makes investment location a core part of trade planning for Taiwanese semiconductor firms.
How the quota system works
The agreement includes a quota system for chip imports from Taiwan. During construction of new factories in the US, companies can import 2.5 times their planned capacity tariff-free from Taiwan.
After those facilities begin operating, the quota changes. At that point, companies can import 1.5 times actual US production tariff-free.
That structure gives companies a benefit while US plants are being built, then ties future tariff-free imports to real domestic output. The more capacity a company operates in the US, the more room it has to import chips from Taiwan without tariffs under the quota system.
According to Bernstein analyst Mark Li, TSMC's entire Taiwan export volume would be tariff-free once the company has 40 percent of its capacity in the US. That figure shows how closely the deal connects US-based manufacturing with continued access to Taiwanese production.
TSMC is already central to the shift
TSMC is a major focus because it produces roughly 90 percent of the world's most advanced semiconductors. The company has already committed to $165 billion in US investments.
Volume production started in Arizona for Nvidia and Apple in late 2025. By the early 2030s, 30 percent of TSMC's most advanced production capacity at 2 nanometers and below should be located in the US.
That target is significant, but it does not mean the center of TSMC's global production immediately moves to America. According to the Financial Times, that 30 percent target represents only about 10 percent of TSMC's current global capacity.
The share could also shrink in the coming years if TSMC makes major additional capital investments. In other words, even large US commitments may sit alongside continued expansion elsewhere in the company's global manufacturing base.
Commerce Secretary Howard Lutnick told CNBC that TSMC has acquired hundreds of acres of land next to its existing Arizona site. He said the company should explain any further expansion plans. TSMC stayed cautious, saying all investment decisions are based on market conditions and customer requirements.
The pressure on companies that do not build
The agreement is backed by a clear threat. Lutnick told CNBC that Taiwanese chip companies that do not build in the US face tariffs of 100 percent.
The administration's stated goal is to relocate 40 percent of Taiwan's semiconductor supply chain to the US. Its ultimate aim is to make America self-sufficient in semiconductor manufacturing.
The deal follows a period of uncertainty for chip companies. The Trump administration imposed sweeping reciprocal tariffs last year but exempted semiconductors, launching a national security investigation instead. The new agreement gives companies a clearer view of how tariff policy may apply to future semiconductor trade.
Political approval is still required
Taiwan's Deputy Premier Cheng Li-chiun said the $250 billion investment figure is based on companies' existing expansion plans. She also said the goal is not to relocate Taiwan's chip industry abroad.
That point matters because the agreement pushes more production capacity toward the US while Taiwan remains a central base for advanced semiconductor manufacturing. The deal tries to balance those two realities: American demand for domestic capacity and Taiwan's interest in keeping its chip industry anchored at home.
The agreement is not yet final in Taiwan. Taiwan's parliament, controlled by the opposition, still needs to approve the deal.
Until that approval happens, the agreement remains a major policy framework rather than a completed shift. If approved, it would reshape how Taiwanese chip companies weigh US investment, tariff exposure, and export strategy.