Washington: The United States and Taiwan signed a significant trade and investment agreement, which includes a reduced U.S. "reciprocal" tariff on Taiwanese products and a commitment from Taiwanese enterprises to invest directly in the U.S. to the tune of US$250 billion, as announced by the Commerce Department.

According to Yonhap News Agency, the agreement was formalized between the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office in the U.S. This deal is designed to establish a strategic economic partnership that aims to strengthen U.S. domestic semiconductor supply chains. The agreement includes the U.S. lowering its country-specific tariffs on Taiwanese goods from 20 percent to 15 percent, aligning them with the rates applied to South Korean and Japanese products.

In exchange, Taiwanese semiconductor and technology enterprises have pledged to make substantial investments in the U.S., totaling at least $250 billion. These investments will focus on building and expanding advanced semiconductor, energy, and artificial intelligence production and innovation capacity within the U.S. Additionally, Taiwan has committed to providing credit guarantees of at least $250 billion to support further investment by Taiwanese enterprises in the U.S. chip supply chain.

The agreement also specifies that tariffs on Taiwanese auto parts, timber, lumber, and wood-derivative products will not exceed 15 percent. This aligns with the tariffs imposed by the Trump administration last year on South Korea and Japan, which resulted in their commitments to invest $350 billion and $550 billion in the U.S., respectively.

The fact sheet accompanying the agreement highlights that future Section 232 duties on Taiwanese semiconductors will benefit Taiwanese producers investing in the U.S. Taiwanese companies constructing new U.S. semiconductor capacity will be allowed to import up to 2.5 times that planned capacity without incurring sectoral duties during the construction period. Those completing new chip production projects will still be able to import 1.5 times their new U.S. production capacity duty-free.

The Commerce Department emphasized that this agreement is expected to enhance U.S. economic resilience, generate high-paying jobs, and reinforce national security.