US and Taiwan seal landmark trade deal reducing tariffs to 15% and spurring strategic investment

In a significant recalibration of economic ties, the United States and Taiwan have struck a trade agreement of 15% US tariffs on Taiwanese goods, which also sets the stage for massive bilateral investment and supply-chain cooperation.

According to a post from the American Institute in Taiwan (AIT), the de facto embassy of the US to Taiwan, the new agreement features, among others, the following facts: US reciprocal tariff applied to Taiwan will total no more than 15% and that US Section 232 duties applied to Taiwanese auto parts, timber, lumber, and wood derivative products will total no more than 15%.

Agreement reached after protracted negotiations

After months of complex negotiations, the US and Taiwan confirmed on Jan. 15, 2026 (EST) that they have reached a comprehensive trade agreement.

Under the new arrangement, the US will reduce tariffs on Taiwanese exports from the previous 20% rate to a flat 15%, and crucially, these tariffs will not be stacked on existing Most-Favored-Nation (MFN) duties, a move that places Taiwan on equal footing with Japan, South Korea and the European Union in terms of tariff burden.

The accord was formalized with representatives from Taiwan's Executive Yuan, Taiwan's executive branch of government at the central level, and US officials, including US Secretary of Commerce Howard Lutnick and the US Trade Representative Jamieson Greer, underscoring its high importance for the two sides.

Scope and strategic dimensions of the deal

Beyond the headline reduction in tariffs, the agreement enshrines a series of strategic arrangements and collaborative frameworks.

Most-Favored Treatment under Section 232: Taiwanese semiconductors and related products will receive preferential tariff treatment under US Trade Expansion Act Section 232, a rare status that enhances their competitiveness in the American market.

Broader Sector Inclusion: Tariffs on Taiwanese automobile parts, lumber and wood products will also be capped at 15%, and certain categories such as generic drugs, relevant ingredients, scarce natural resources, and aircraft components may face zero duties under specific conditions.

Negotiation Mechanism: With the deal, Washington and Taipei agree to set up a bilateral mechanism under Section 232 for ongoing dialogue and tariff oversight.

Massive investment commitments

A centerpiece of the agreement is a commitment, led by Taiwanese private firms including world-leading semiconductor company TSMC, to invest at least US$250 billion (NT$7.89 trillion) in the United States.

These funds are earmarked for expanding advanced semiconductor manufacturing, energy infrastructure, and artificial intelligence (AI) as well as innovation capabilities within US borders.

The Department of Commerce added that Taiwanese companies establishing new semiconductor manufacturing operations in the United States would be accorded more favorable treatment in future tariff determinations on chips.

Such step seeks to underpin the formation and long-term expansion of a fully integrated semiconductor supply chain and ecosystem on American soil.

In tandem, Taiwan's government agrees that it will provide US$250 billion in credit guarantees for financial institutions to support investments in semiconductor and the ICT industry in the US aiming to fortify supply-chain linkages.

"The objective is to bring 40% of Taiwan's entire supply chain and production to domestically bring it into America." Secretary Lutnick said during an interview with CNBC and stated that the US aims to reach this threshold within Trump's term.

This colossal investment pledge, among the largest such commitments in recent US-Taiwan economic history, is intended not solely to redress tariff concerns, but also to bolster US industrial resilience and secure the semiconductor ecosystem against geopolitical disruption.

Remarks from Taiwan's President Lai

Taiwan's President Lai Ching-te (賴清德) said on Jan. 16 that Taiwan had become the first economy worldwide to secure US agreement allowing companies investing in the United States to receive preferential treatment under Section 232 tariffs.

He noted that Taiwanese firms producing semiconductors or related products would be exempt from duties within a specified quota, while volumes beyond that threshold would still qualify for the most favorable tariff rates available.

Lai added that Washington has expressed support for what he described as the "Taiwan model," under which the US government would assist Taiwanese investors with access to land, utilities and other essential infrastructure, enabling them to form industrial clusters in the United States.

Such clustering, he said, would facilitate closer collaboration between Taiwanese and American companies in research, design and market development, further integrating Taiwan's industries into the American economic structure.

Beyond Taiwanese investment in the United States, Lai said the agreement also opens the door for top US firms to invest in Taiwan, with target sectors including semiconductors, AI, defense, security technologies, next-generation communications and biotech.

Taken together, he said, the arrangement would lead to deeper bilateral economic ties and create a win-win trajectory for both economies. Lai emphasized that the outcome of the negotiations would strengthen Taiwan's industrial base while enabling companies to “root themselves in Taiwan, deploy globally and compete in markets worldwide,” calling on the public to unite behind the strategy.