The United States and Taiwan signed a trade agreement to lower the reciprocal tariff rate to 15% and for Taiwan corporations to provide $250 billion (about 367 trillion won) each in direct investment and credit guarantees in the United States, investing a total of about $500 billion.
On the 15th (local time), the U.S. Department of Commerce said in a news release that "Taiwan's semiconductor and technology corporations will make $250 billion in new direct investments in the United States to build and expand production and innovation capacity in advanced semiconductors, energy, and artificial intelligence (AI)."
In addition, the Taiwan government will provide at least $250 billion in credit guarantees to spur Taiwan corporations' investment in the United States and support building a complete semiconductor supply chain and ecosystem in the country.
U.S. Commerce Secretary Howard Lutnick emphasized in a CNBC interview that Taiwan's investment in the United States amounts to $500 billion. The figure combines direct investment ($250 billion), centered on TSMC, Taiwan's leading semiconductor corporation, and investment by small and midsize corporations backed by government guarantees ($250 billion).
In return, the United States will lower the reciprocal tariff applied to Taiwan products from 20% to 15%. That is the same tariff rate applied to South Korea and Japan, which previously lowered their rates through investments of $350 billion and $550 billion, respectively, in the United States.
Taiwan corporations building new semiconductor production facilities in the United States will be exempt from item-specific tariff under Section 232 of the Trade Expansion Act up to 2.5 times their production capacity during construction. In addition, Taiwan corporations that complete semiconductor production facilities in the United States will be exempt from item-specific tariff for volumes up to 1.5 times the facilities' production capacity.
Attention is on how the agreement will affect South Korean corporations, which compete with Taiwan in semiconductor exports to the United States. According to the joint fact sheet from the Korea-U.S. summit announced on Nov., South Korea has been confirmed to receive most-favored-nation treatment on semiconductor tariffs.
In addition, the two sides agreed to set item-specific tariffs on Taiwan-made auto parts, lumber, logs, and wood derivatives at 15%. Generic drugs, active ingredients, aircraft parts, and natural resources that cannot be procured in the United States will be exempt from the reciprocal tariff.