Taiwan positions itself as strategic AI partner to US after tariff deal

Taiwan is moving to cement its role as a long-term strategic partner to the United States in artificial intelligence and advanced technologies after securing a trade agreement that cuts tariffs and encourages large-scale Taiwanese investment in the US, Vice Premier Cheng Li-chiun said on Friday. 

Speaking in Washington after concluding negotiations, Cheng said the deal was designed to promote two-way investment in high-tech industries, with a strong emphasis on semiconductors and AI. The objective, she said, is to build a durable partnership rather than trigger a one-sided relocation of production capacity.

Finalised on Thursday, the agreement cuts the reciprocal tariff rate on Taiwanese goods to 15% from 20%, while laying the groundwork for expanded Taiwanese investment in the US technology sector. The agreement comes as the Trump administration continues to push for more advanced semiconductor manufacturing to be located in the United States, particularly to support the AI-driven surge in chip demand.

US officials estimate that Taiwanese companies could invest up to $250 billion in the United States across semiconductors, energy and artificial intelligence. That total includes Taiwan Semiconductor Manufacturing Co.’s (TSMC) $165 billion planned investment in the United States, including an additional $100 billion expansion announced in 2025, with further investments expected in the coming years.

The deal also provides for $250 billion in credit guarantees from Taiwan to support outbound investment.

Cheng described the agreement as a “win-win” outcome, stressing that investment decisions will remain market-driven rather than government-directed. She added that Taiwanese firms would continue to expand domestic operations even as they grow their footprint overseas.

“This is not about moving the supply chain, but building it,” Cheng said, arguing that US manufacturing expansion should be seen as an extension of Taiwan’s technology ecosystem rather than a hollowing-out of its core industries.

Taiwan’s economy ministry said investment plans will also include AI servers and energy infrastructure, though individual companies will decide how much capital is allocated to chipmaking. Markets reacted positively, with Taiwan’s benchmark stock index ending higher as sentiment improved following the agreement and continued optimism around AI-linked demand.

Analysts say the agreement reinforces Washington’s view of Taiwan as a central pillar of the global semiconductor supply chain. As the world’s most important producer of advanced chips, Taiwan’s technological leadership has become increasingly critical as AI demand accelerates.

TSMC welcomed the prospect of closer US–Taiwan trade ties, reiterating that its investment decisions are guided by customer demand and market conditions. The company has consistently said it would continue investing in Taiwan while expanding overseas to meet global needs for advanced manufacturing.

The agreement still requires ratification by Taiwan’s parliament, where opposition lawmakers have raised concerns about its long-term impact on the island’s chip industry. US officials have indicated they want a significant share of Taiwan’s semiconductor supply chain built in the United States, although Taiwanese officials expect that even by the mid-2030s, most advanced chip production will remain on the island.

Taiwanese officials argue that a more geographically diversified supply chain will ultimately strengthen resilience for both economies, particularly as the largest future AI orders are expected to come from the US market.

Summary

Taiwan is positioning itself as a key AI and semiconductor partner to the United States following a tariff-cutting trade deal linked to major investment commitments. While encouraging Taiwanese firms to expand in the US, Taipei says the strategy is focused on building resilient, shared supply chains rather than shifting Taiwan’s technological core abroad.

FAQs

Q1: What does the US–Taiwan tariff deal include?

The agreement reduces tariffs on a range of Taiwanese exports to 15% from 20% and encourages Taiwanese investment in US sectors such as semiconductors, artificial intelligence and energy.

Q2: Why is artificial intelligence central to Taiwan’s strategy?

AI systems rely on advanced chips, an area where Taiwan is globally dominant. Closer alignment with the US strengthens long-term demand and reinforces Taiwan’s strategic position in AI supply chains.

Q3: How much investment is Taiwan expected to make in the US?

US officials estimate Taiwanese firms could invest up to $250 billion, with Taiwan also offering $250 billion in credit guarantees to support outbound investment.

Q4: Are Taiwanese companies being forced to invest in the US?

No. Taiwan says decisions will be made by companies based on commercial and market considerations, not government mandates.

Q5: Will the deal weaken Taiwan’s domestic semiconductor industry?

Taiwan’s government says it will not, arguing that Taiwan will continue domestic expansion while overseas investments are positioned as complementary.

Q6: What role does TSMC play in the agreement?

TSMC is central to the investment narrative, with $165 billion planned in the US, including a $100 billion expansion announced in 2025.

Q7: Why is the US pushing for more domestic chip production?

Washington considers reliance on overseas manufacturing a national-security and economic vulnerability as advanced computing and AI become more critical.

Q8: Could the deal affect US–China relations?

Potentially. China opposes deeper US–Taiwan cooperation and may view the agreement as further escalation in strategic and technology competition.

Q9: What does this mean for global semiconductor supply chains?

It signals a push toward geographically diversified chip manufacturing, which policymakers say may improve resilience amid rising geopolitical risk.