Taiwan will invest $250 billion in U.S. chip factories, backed by $250 billion in government credit

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The United States and Taiwan have signed a new trade deal to bring chip manufacturing directly onto American soil, the Commerce Department said on Thursday.

As part of the agreement, Taiwanese chip and tech companies will invest at least $250 billion into U.S. production.

On top of that, Taiwan’s government will guarantee another $250 billion in credit to back those companies.

In return, the U.S. will cut reciprocal tariffs on Taiwan from 20% to 15%. Tariffs will drop to zero for generic drugs, their ingredients, aircraft parts, and a few natural materials.

These changes are meant to push Taiwan-based firms to start building and expanding inside the U.S. instead of just exporting from Asia.

TSMC buys land for new expansion in Arizona

Taiwan Semiconductor (TSMC) is already ahead. The company bought more land next to its existing site in Arizona, according to Commerce Secretary Howard Lutnick.

“They just bought hundreds of acres adjacent to their property,” Howard said. “I’ll let them go through with their board and give them time.”

That land could soon turn into more chip factories, adding to what TSMC has already built in the state. The company has already spent up to $40 billion in Arizona to produce chips for Apple, Nvidia, and others, using grants under the CHIPS Act.

New factories being built by Taiwan companies in the U.S. will also get special treatment under Section 232 tariff rules. While under construction, they’ll be allowed to import 2.5 times their planned capacity without paying tariffs.

Once the sites go live, they’ll still be allowed to bring in 1.5 times their U.S. output without facing import taxes.

Section 232 exceptions will also apply to Taiwanese auto parts, wood products, and other related goods, keeping them under the 15% tariff limit.

This is all part of a broader plan to create long-term certainty for companies, especially those dealing with the back-and-forth policy swings from the Trump administration over the past year.

U.S. threatens 100% tariff for non-participating Taiwan firms

Howard made it clear that Taiwanese companies that refuse to build in the U.S. are not going to get off easy.

“That’s what they get if they don’t build in America, the tariff’s likely to be 100%,” he said. The government wants 40% of Taiwan’s chip supply chain moved to the U.S. as fast as possible.

The deal doesn’t stop TSMC or others from making chips in Taiwan for American companies. But if they choose to stay put and not expand here, they’ll face tough import costs. This is Washington’s way of using tariffs as a stick while holding out a very big carrot.

The pressure also comes with growing fear in D.C. about a possible Chinese invasion of Taiwan.U.S. officials have warned that any cut-off from TSMC would leave the American economy exposed.

The race to secure access to AI chips has made this even more urgent. “We’re going to bring it all over so we become self-sufficient in the capacity of building semiconductors,” Howard said.

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