The US and Taiwan just sealed one of the biggest semiconductor deals in recent memory. In exchange for dropping Taiwan's tariffs from 20 to 15 percent, Taiwanese tech companies are pledging $250 billion to build and expand chip factories across America. TSMC, the world's biggest chipmaker, is leading the charge. The move represents Trump's tariff threats actually working and marks a dramatic shift in how the global chip supply chain will be shaped.
The deal just announced by the Commerce Department turns Trump's tariff threats into actual manufacturing commitments. Under the agreement, Taiwan is cutting a 5-point tariff reduction across all goods in exchange for what amounts to a historic industrial policy win for the US. Taiwanese technology companies are promising $250 billion to build and expand chipmaking facilities stateside, with Taiwan's government backing at least another $250 billion in credit to finance the buildout.
This wasn't a voluntary shift. Commerce Secretary Howard Lutnick told CNBC the country agreed because "they need to keep our president happy," and that "Donald Trump is vital to protecting them." The language is blunt, but it reflects the geopolitical reality: Taiwan's security depends on US commitment, and that commitment now comes with a price tag.
The real leverage here traces back to last year when Trump threatened a 100 percent tariff on chips and semiconductors not made in the US. That threat hung over the entire industry like a sword. He's also begun imposing a 25 percent tariff on advanced AI chips like those from Nvidia and AMD sold into China, essentially cutting the US government in on chip profits. Lutnick made clear the 100 percent tariff threat hasn't gone away: "That's what they get if they don't build in America."
The deal's details reveal how much the US extracted. Taiwanese companies building factories in America can import up to 2.5 times their planned manufacturing capacity without extra tariffs during construction. Once factories are operational, that drops to 1.5 times capacity, tariff-free. It's essentially a tariff holiday for capital imports while they build, then a permanent tariff-advantaged position once production starts. The US also eliminated reciprocal tariffs on generic pharmaceuticals, aircraft components, and natural resources, throwing in sweeteners to make the deal palatable to Taiwan's broader economy.
