US and Taiwan sign $250B trade deal, cutting tariffs on Taiwanese goods
[January 16, 2026] By
CHAN HO-HIM and DIDI TANG
HONG KONG (AP) — The United States and Taiwan reached a trade deal
Thursday that cuts tariffs on Taiwanese goods in exchange for $250
billion in new investments in the U.S. tech industry.
The deal is the latest President Donald Trump has struck — such as those
with the European Union and Japan — since he unveiled a sweeping tariff
plan last April to address trade imbalances. Trump also has a one-year
trade truce with China to stabilize ties with the world's second largest
economy.
Trump initially set the tariff at 32% on Taiwanese goods but later
changed it to 20%. The new agreement slashes the tariff rate to 15%, the
same as levied on other U.S. trading partners in the Asia-Pacific region
such as Japan and South Korea.
In a statement, the U.S. Department of Commerce said the deal with
Taiwan would establish an “economic partnership” to create several
“world-class” U.S.-based industrial parks in order to help build up
domestic production. The department described it as "a historic trade
deal that will drive a massive reshoring of America’s semiconductor
sector.”
The Taiwanese government affirmed key details in the deal in a
statement, saying that the “Taiwan model" will go to the U.S. and help
expand the global competitiveness of the island's technology industry
while deepening strategic cooperation between the two nations.
Taiwan's executive branch said the island's companies would specifically
invest $250 billion in industries such as semiconductors, artificial
intelligence applications and energy.
In addition to cutting the tariffs on the island nation, the Commerce
Department said it will exempt certain imports such as generic
pharmaceuticals and aircraft components from Taiwan. Taiwanese
semiconductor producers that invest in the U.S. also will get favorable
tariff treatments, including exemptions, the department said.
One day before the deal was announced, Beijing, which claims Taiwan to
be part of China, scoffed at it, calling the agreement “an economic
plunder” by the U.S. on Taiwan.
TSMC to lead investments
The deal came just when Taiwan-based TSMC, the world’s largest computer
chipmaker, on Thursday announced plans to increase its capital spending
by as much as nearly 40% this year after it reported a 35% jump in its
net profit for the latest quarter thanks to the boom in artificial
intelligence.
Taiwan Semiconductor Manufacturing Corp., a major supplier to companies
including Nvidia and Apple, reported a net profit of 506 billion new
Taiwan dollars ($16 billion) for the October-December quarter, a 35%
surge from a year earlier, better than analysts’ estimates.
TSMC said Thursday that its revenue in the last quarter increased 21%
from a year earlier to more than 1.046 trillion new Taiwan dollars ($33
billion).
TSMC said it plans to boost its capital expenditure budget to $52
billion-$56 billion for 2026, up from about $40 billion last year.
[to top of second column] |
This photo shows the logo of TSMC (Taiwan Semiconductor
Manufacturing Company) during the Taiwan Innotech Expo at the World
Trade Center in Taipei, Taiwan, Oct. 14, 2022. (AP Photo/Chiang
Ying-ying, File)
 The company’s Taiwan-listed shares
have jumped 59% over the past 12 months, reflecting its strong
position in the AI-driven market.
Other tech giants including Microsoft, Meta and
Alphabet are spending big on investments in AI infrastructure.
“We expect our business to be supported by continuous strong demand
for our leading edge process technologies,” Wendell Huang, TSMC's
chief financial officer, said in a conference call. He said spending
would be “significantly higher” in the next three years.
Asked about concerns over an AI bubble -- as critics point to
ballooning investments which might not pay off -- TSMC chairman and
CEO C. C. Wei said he is confident that the growing demand from
customers is real.
“I'm also very nervous about it, you bet,” said Wei. “AI is real.
Not only real, it's starting to grow into our daily life."
With a market capitalization -- total outstanding shares times share
price -- of approximately $1.4 trillion, TSMC is currently more
valuable than Samsung Electronics and Alibaba. It is Asia’s most
valuable listed company.
Alphabet, Google’s parent, passed the $4 trillion market
capitalization mark this month, the fourth Big Tech company to hit
that mark after Nvidia, Apple and Microsoft, although worries about
an AI bubble had led to occasional sell-offs.
TSMC has pledged around $165 billion of investments in the U.S. and
said Thursday it’s speeding up construction of new plants in
Arizona, looking to create a fabrication plant cluster and meet
strong demand from clients.
A primary beneficiary of AI, given its dominant share in
cutting-edge chip manufacturing, TSMC’s outlook remains optimistic,
analysts from Morningstar said in a recent report.
“It (TSMC) is immune from market share shifts as almost every AI
company relies on TSMC to make chips ranging from
application-specific integrated circuits to GPUs (graphics
processing units),” the Morningstar analysts said. “This reliance
translates into strong pricing power.”
TSMC also has strong buffers with a “robust backlog from
deep-pocketed customers," they said, even if there are any
short-term drops in demand.
—
Tang reported from Washington.
All contents © copyright 2026 Associated Press. All rights reserved |
