Taiwan signs deal to invest $250 billion into US tech industry and slash tariffs on its exports
After many months of ups and downs, Taiwan's vice premier Cheng Li-chiun has announced a deal that should slash tariffs on the country's exports to the US. In turn, Taiwan will boost its investment in the US tech industry, particularly when it comes to the production of silicon for AI.
U.S. commerce secretary Howard Lutnick said that this deal will see Taiwan putting $250 billion towards not only AI or semiconductor production, but energy as well (via Reuters). This figure includes $100 billion from chipmaker TSMC, which it already committed to investing last year as part of a long term plan to build new fabs in the US.
Both TSMC and the Taiwanese government have also committed to investing more in the future, with the country committing to guarantee an additional $250 billion in credit. The hope is that all this money from Taiwan will encourage reciprocal investment in the country from the US. Vice Premier Cheng said, "In this negotiation, we promoted two-way Taiwan–U.S. high-tech investment, hoping that in the future we can become close AI strategic partners."
Reading between the lines of this optimistic statement, there's still plenty of uncertainty. For one thing, the deal has yet to be ratified by Taiwan's government. Currently, the opposition has the most seats and has already expressed concerns over a "hollowing out" of the country's pivotal chip industry. Previously, this was met with reassurances that Taiwan would keep its most cutting-edge nodes close to home.
Cheng also said more recently, "We believe this supply-chain cooperation is not 'move,' but 'build.' We expand our footprint in the US and support the US in building local supply chains, but even more so, it is an extension and expansion of Taiwan's technology industry."
However, it's worth noting that U.S. Commerce Secretary Howard Lutnick told CNBC that the Trump administration's goal was to bring 40% of Taiwan’s semiconductor supply chain to the US—and if chipmakers such as TSMC weren't going to build on American soil, then tariffs would be levied at 100%. That…doesn't seem like much of a choice to me.
Taiwan's economy minister Kung Ming-hsin disagreed with the '40%' figure, saying that he was uncertain how it was calculated, and instead, Taiwan's expectation was that the production split between the two countries would be closer to 80/20 by 2036. This will likely include advanced chips of five nanometres and below. Taiwan has previously rejected a 50/50 production split proposal.
I'd be remiss if I didn't also mention China, with which both Taiwan and the US have their own distinct, complicated relationship. China has previously criticised Taiwan for its earlier trade dealings, expressing concerns that the government wanted to give away TSMC as a 'souvenir' to the US.
More recently and most memorably, the Trump administration levied a 100% China tariff before agreeing to a one-year trade truce in October last year. With that in mind—not to mention how Beijing claims Taiwan's territory as its own, while Taiwan itself rejects these claims of sovereignty—Taiwan's bid to forge a stronger relationship with the US independently of the People's Republic is likely to irritate China.