The United States and Taiwan to have reached a trade agreement to be built chips and chip factories on American soil, the Department of Commerce announced Thursday.
Under the agreement, Taiwanese chip and technology companies will invest at least $250 billion in production capacity in the United States, and the Taiwanese government will guarantee $250 billion in credit to these companies.
In exchange, the United States will limit “reciprocal” tariffs on Taiwan to 15%, down from 20%, and commit to imposing no reciprocal tariffs on generic pharmaceuticals, their ingredients, aircraft components and certain natural resources.
Taiwan Semiconductor Manufacturing Co. has purchased land and could expand into Arizona as part of the deal, Commerce Secretary Howard Lutnick told CNBC’s Brian Sullivan in an interview Thursday.
“They just purchased hundreds of acres adjacent to their property,” Lutnick said. “I’ll let them do their boards and give them some time.”
“Regarding TSMC’s projects, the market demand for our cutting-edge technology is very strong, we continue to invest in Taiwan and expand overseas, all investment decisions are based on market conditions and customer demands,” a TSMC spokesperson told CNBC.
The announcement added that future Section 232 tariffs will have some exceptions for companies that manufacture chips in the United States. Taiwanese companies building new chip manufacturing plants in the United States, such as TSMC – will be able to import up to 2.5 times the capacity they build while factories are under construction, without paying customs duties under this framework.
Taiwanese auto parts, wood and related products will also avoid tariffs above 15 percent under Section 232, the statement said.
Read more CNBC tech newsWhen the factories are completed, companies will be able to import 1.5 times their U.S. production capacity, Commerce said.
The deal brings clarity to chipmakers and technology companies that have grappled with uncertainty over the past year over the Trump administration’s approach to tariffs in the semiconductor industry.
It also incentivizes TSMC, the world’s top manufacturing company, to continue building more factories on U.S. soil, while making it clear that it can continue to make chips for U.S. companies in Taiwan.
“As a semiconductor foundry serving customers around the world, we welcome the prospect of strong trade agreements between the United States and Taiwan,” a TSMC representative said in a statement.
Lutnick said in the interview that Taiwan-based chip companies that don’t build in the United States would likely face 100% tariffs. He said the government’s goal was to bring 40% of Taiwan’s semiconductor supply chain to the United States.
“That’s what they’re going to get if they don’t build in America, the tariffs will probably be 100 percent,” Lutnick said.
TSMC has already built factories in Arizona, investing up to $40 billion to produce chips for companies like Apple And Nvidiausing previous grants from the U.S. government under the CHIPS Act.
The U.S. government has prioritized U.S. production of cutting-edge chips as the fight for access to artificial intelligence semiconductors has become a key geopolitical issue.
U.S. officials also said there would be significant risk to the U.S. economy if China invades Taiwan and reduces access to TSMC chips.
“We’re going to do everything we can to become self-sufficient in the ability to build semiconductors,” Lutnick said.
