^{Photo: Bloomberg.com}

The United States and Taiwan have finalized a major trade agreement that reduces tariffs on Taiwanese exports to 15% while opening Taiwan’s market to a broad range of American industrial and agricultural products. The deal places Taiwan on similar tariff footing as key U.S. allies Japan and South Korea and signals deepening economic ties amid intensifying geopolitical competition in Asia.

Under the agreement, Washington will lower duties on Taiwanese goods to 15%, while Taipei will eliminate or reduce 99% of tariff barriers on U.S. exports. The pact also includes large-scale purchase commitments and renewed focus on semiconductor supply chain cooperation.

Tariff Cuts and Expanded U.S. Market Access

The tariff reduction to 15% is expected to benefit Taiwanese exports across electronics, machinery, automotive components, and advanced manufacturing equipment — sectors that collectively account for a substantial share of Taiwan’s more than $100 billion in annual exports to the United States.

In return, Taiwan will dramatically open its domestic market. Nearly all tariffs on American goods will be scrapped or reduced, alongside “preferential market access” provisions covering:

• U.S.-manufactured vehicles
• Beef and other agricultural products
• Industrial machinery and minerals
• Energy equipment and advanced power systems

According to the Office of the U.S. Trade Representative, Taiwan has also agreed to address long-standing non-tariff barriers. One key change includes accepting vehicles built to U.S. Federal Motor Vehicle Safety Standards without requiring additional local certification — a move long sought by American automakers.

$84 Billion in U.S. Purchases Through 2029

Beyond tariff adjustments, Taiwan has committed to purchasing more than $84 billion in American goods between 2025 and 2029. The purchase package spans:

• Liquefied natural gas and crude oil
• Civil aviation aircraft and aerospace components
• Power generation equipment
• Industrial infrastructure supplies

Energy imports are expected to form a large share of the total, strengthening U.S. LNG exporters and deepening Taiwan’s energy diversification strategy.

The aviation component is also significant, as Taiwan’s airlines continue modernizing fleets to meet rising passenger and cargo demand. The agreement could generate multi-billion-dollar contracts for U.S. aerospace manufacturers over the next five years.

Semiconductor Supply Chain Tensions

The trade deal builds on commitments announced in January, when Taiwanese chip and technology firms pledged at least $250 billion in U.S.-based production investments. That effort was supported by an equivalent amount of Taiwanese government-backed credit to facilitate overseas expansion.

Semiconductors remain the centerpiece of U.S.–Taiwan economic ties. Taiwan is home to TSMC, the world’s largest contract chipmaker, which produces advanced semiconductors critical for smartphones, AI systems, automotive electronics, and defense applications.

However, differences remain over how much of Taiwan’s semiconductor ecosystem should shift to the United States. U.S. officials have stated a goal of relocating up to 40% of Taiwan’s chip supply chain to American soil to reduce strategic vulnerabilities.

Taiwanese leaders have pushed back strongly against that target. Vice Premier Cheng Li-chiun said the island’s semiconductor network, built over decades, cannot simply be transplanted abroad. Officials in Taipei maintain that overseas expansion must complement — not replace — domestic production.

Taiwan’s broader position is that its global competitiveness depends on keeping the core of its semiconductor ecosystem rooted at home while selectively expanding manufacturing footprints overseas.

China’s Reaction and Regional Implications

The agreement has drawn criticism from Beijing. Xi Jinping has repeatedly described Taiwan’s reunification with mainland China as historically inevitable. China considers the self-governed island part of its territory, while Taiwan rejects those claims.

Chinese officials previously criticized the January investment commitments, arguing that deeper economic integration with the United States could weaken Taiwan’s industrial base. Beijing has framed such deals as benefiting Washington at Taiwan’s expense.

The trade pact arrives against a backdrop of rising military and economic pressure in the Taiwan Strait. While the United States does not maintain a formal mutual defense treaty with Taiwan, the 1979 Taiwan Relations Act commits Washington to provide defensive support to help the island maintain sufficient self-defense capabilities.

In December, the U.S. approved $11.15 billion in arms sales to Taiwan — one of the largest packages in recent years — prompting sharp objections from Beijing.

Economic Impact and Strategic Significance

The trade agreement is poised to deepen bilateral trade, which already exceeds $100 billion annually. For U.S. exporters, expanded access to Taiwan’s high-income consumer base and advanced industrial sector could drive growth in agriculture, automotive manufacturing, energy exports, and aerospace.

For Taiwan, reduced U.S. tariffs strengthen its competitive position in one of its most important export markets, especially in electronics, advanced components, and high-value manufacturing.

Strategically, the deal reinforces Taiwan’s alignment with the United States at a time of intensifying competition between Washington and Beijing. Economically, it integrates supply chains more tightly across semiconductors, energy, and industrial goods.

While challenges remain over semiconductor relocation targets and regional security tensions, the agreement represents one of the most comprehensive upgrades in U.S.–Taiwan trade relations in recent years.

In an era defined by supply chain realignment and geopolitical recalibration, this pact signals that economic policy is increasingly intertwined with national security strategy.