Washington: The United States and Taiwan have signed a significant trade and investment agreement, marking a major step in economic collaboration between the two nations. The agreement, announced by the Commerce Department, features a reduced U.S. "reciprocal" tariff on Taiwanese products and a commitment from Taiwanese enterprises to invest US$250 billion in the United States.

According to Yonhap News Agency, the deal was signed by the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office in the U.S. It aims to establish a strategic economic partnership, with a focus on strengthening U.S. domestic semiconductor supply chains. As part of the agreement, the U.S. will lower its tariffs on Taiwanese goods to 15 percent, aligning them with tariffs on South Korean and Japanese products, down from the previous 20 percent.

Taiwanese semiconductor and technology enterprises are set to make significant investments in the U.S., totaling at least $250 billion. This investment will be directed towards building and expanding advanced semiconductor, energy, and artificial intelligence production and innovation capacity within the United States. For context, previous deals with the Trump administration saw South Korea and Japan commit $350 billion and $550 billion in U.S. investments, respectively.

The agreement also specifies that tariffs on Taiwanese auto parts, timber, lumber, and wood-derivative products will be capped at 15 percent. These tariffs were initially introduced by President Donald Trump under Section 232 of the Trade Expansion Act of 1962, a law that allows the president to adjust imports if they threaten national security.

The Commerce Department's fact sheet highlights that future Section 232 duties on Taiwanese semiconductors will benefit those producers investing in the U.S. Taiwanese companies constructing new U.S. semiconductor capacities will be allowed to import up to 2.5 times their planned capacity without paying sectoral duties during the construction period. Even after completing new chip production projects, they can import 1.5 times their new production capacity duty-free.

The department emphasized that this unprecedented commitment is expected to enhance U.S. economic resilience, create high-paying jobs, and bolster national security.