Washington and Taipei have signed a trade agreement that will reduce U.S. tariffs on Taiwanese exports to 15%, the same level as U.S. tariffs on Asian allies such as Japan and South Korea, while Taiwan will also open its market to U.S. goods. According to the agreement, Taiwan will eliminate or reduce 99% of tariff barriers on U.S. goods and provide "preferential market access" to U.S. industrial and agricultural exports, covering areas such as automobiles, beef products, and minerals.
Taiwan also plans to purchase more than $84 billion in U.S. goods between 2025 and 2029, including liquefied natural gas, crude oil, aircraft and electrical equipment. The USTR said Taiwan has committed to "addressing long-standing non-tariff barriers" such as accepting U.S. cars that meet U.S. federal motor vehicle safety standards without any additional requirements.
The agreement was initially announced in January, when Taiwanese chip and technology companies committed to investing at least $250 billion in building production capacity in the United States, with the government providing an equal amount of credit support to promote additional investment by Taiwanese companies. However, Taiwan and the United States have different views on chip supply chain issues. U.S. Commerce Secretary Howard Lutnick told CNBC last month that the goal is to transfer 40% of Taiwan's semiconductor supply chain to the United States under President Trump. He also said that Taiwanese chip companies that have not built factories in the United States may face 100% tariffs.
Taiwan expressed opposition to this proposal. Taiwan has told Washington that it is "impossible" to move 40% of the island's semiconductor supply chain to the United States, according to Taipei's chief tariff and trade negotiator. Cheng Li-jun, Vice President of Taiwan's Executive Yuan, told local media that the semiconductor ecosystem Taiwan has built over decades cannot simply be relocated. She said in Chinese that Taiwan's international expansion includes investment in the United States, provided the industry remains rooted in Taiwan and continues to expand domestic investment.
China, which considers democratically governed Taiwan part of its territory, has criticized the January deal, saying it would only "drain Taiwan's economic interests" and accusing the ruling Democratic Progressive Party of allowing the United States to "eviscerate" the island's key industries. Chinese President Xi Jinping believes that Taiwan's reunification with the mainland is a "historical necessity." Taiwan rejects these claims.
Although the United States does not have a mutual defense treaty with Taiwan and has no obligation to defend the island, the Taiwan Relations Act of 1979 stipulates that the United States "will provide Taiwan with defensive materiel and defensive services" to enable Taiwan to "maintain adequate self-defense capabilities." In December last year, the United States approved the sale of arms worth $11.15 billion to Taiwan, one of the largest transactions between the United States and Taiwan. The move triggered a strong reaction from Beijing, with Chinese Foreign Ministry spokesman Guo Jiakun accusing the United States of violating the "one-China principle."