The Department of Commerce announced recently an agreement that will limit tariffs on imports from Taiwan in exchange for investments designed to “decisively strengthen U.S. domestic semiconductor supply chains and secure America’s technological and industrial leadership.” However, it is unclear when the agreement and the included tariff changes may take effect.
According to a DOC fact sheet, Taiwan has agreed that Taiwanese semiconductor and technology enterprises will make at least $250 billion in new, direct investments to build and expand advanced semiconductor, energy, and artificial intelligence production and innovation capacity in the U.S. Taiwan will also provide another $250 billion in credit guarantees to facilitate additional investment by Taiwanese enterprises designed to support the establishment and expansion of the full semiconductor supply chain and ecosystem in the U.S. Finally, Taiwan will facilitate U.S. investment in the Taiwanese semiconductor, AI, defense technology, telecommunications, and biotechnology industries to expand market access for U.S. companies, deepen technological collaboration, and strengthen U.S. leadership in critical and emerging industries.
In return, the DOC states, the U.S. has agreed to the following.
- The “reciprocal” tariff rate applied to imports of Taiwanese goods will total no more than 15 percent and will be zero for generic pharmaceuticals and their generic ingredients, aircraft components, and unavailable natural resources.
- Section 232 tariffs applied to imports of Taiwanese auto parts, timber, lumber, and wood derivative products will total no more than 15 percent.
- Any future Section 232 tariffs applied to Taiwanese semiconductors will reward Taiwanese semiconductor producers that invest in the U.S. Specifically, Taiwanese companies building new U.S. semiconductor capacity may import up to 2.5 times that planned capacity without paying Section 232 tariffs during the approved construction period, with a lower preferential rate for above-quota imports. Taiwanese companies that have completed new chip production projects in the U.S. will still be able to import 1.5 times their new U.S. production capacity without paying Section 232 tariffs.
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