US-Taiwan Seal Trade Pact With $84 Billion Purchasing Obligation, Lower Tariffs – Taiwan Semiconductor (NYSE:TSM)

The United States and Taiwan have signed a trade deal that will reduce tariffs on Taiwanese exports to 15% and open the island’s market to American goods.

US purchase commitment of $84 billion

The new trade deal brings tariffs on Taiwanese exports in line with those of other Asian allies such as Japan and South Korea. The agreement stipulates that Taiwan will eliminate or reduce 99% of tariff barriers on U.S. goods and provide “preferential market access” to U.S. industrial and agricultural exports, including automobiles, beef products and minerals.

Taiwan has also committed to purchasing more than $84 billion worth of U.S. goods between 2025 and 2029. The list includes liquefied natural gas, crude oil, aircraft and electrical equipment.

The Office of the U.S. Trade Representative confirmed that Taiwan has agreed to “resolve long-standing non-tariff barriers,” including the acceptance of U.S. vehicles built to U.S. Federal Motor Vehicle Safety Standards, without imposing additional requirements.

Under the deal first announced in January, Taiwanese technology and chip companies pledged to invest at least $250 billion in U.S. manufacturing capacity, backed by an equal amount of government credits to encourage further investment by these companies.

Conflict between the US and Taiwan over the movement of chips

Relocation of chip supply chains has been a point of contention between Taiwan and the US. The US wants to move 40% of Taiwan’s semiconductor supply chain to the US, and last month Commerce Secretary said Howard Lutnick warned that Taiwanese chip companies that don’t build in the US could face a 100% tariff.

However, Taiwan has refused to move 40% of its semiconductor capacity to the US. The country’s top tariff negotiator had opposed U.S. demands, saying such a large-scale move was not feasible.