U.S. lowers tariff on Taiwanese goods to 15% in trade deal (update)

Taipei, Jan. 16 (CNA) The United States has agreed to lower tariffs on Taiwanese goods from 20 percent to 15 percent, without stacking them on existing most-favored-nation (MFN) rates, Taiwan's Executive Yuan said in a statement Friday.

The agreement, reached in trade negotiations that concluded Thursday (U.S. time), also grants semiconductors and related products the most favorable treatment under Section 232 of the Trade Expansion Act, the Cabinet said.

It also includes commitments to expand supply chain investment cooperation and deepen Taiwan-U.S. strategic collaboration on artificial intelligence, according to the statement.

The new tariff rate of 15 percent matches U.S. rates on goods from major trade partners such as Japan, South Korea and the European Union.

As part of the agreement, Taiwanese semiconductor, electronics manufacturing service (EMS), AI, and energy companies will invest US$250 billion in the U.S. based on their own plans, the Cabinet statement said, though no timetable was given.

At the same time, Taiwan's government has also agreed to provide up to US$250 billion in credit guarantees for financial institutions to support investments in the U.S. market by the semiconductor and information and communication technology sectors, the statement said.

On Monday, the New York Times reported that Taiwan Semiconductor Manufacturing Co. (TSMC) would commit to building at least five more fabs in exchange for a possible reduction in U.S. tariffs on Taiwanese goods.

TSMC Chairman and CEO C.C. Wei (魏哲家) did not directly respond to the New York Times report at an investor conference Thursday, but he said his company was "speeding up" its capacity expansion in the U.S. to satisfy client needs.

With the deal, Taiwan has become the first country in the world to secure the most favorable treatment for its semiconductor and related product suppliers, which should significantly ease uncertainties for the local semiconductor industry, the Cabinet statement said.

The U.S. has also pledged to grant most favorable status to Taiwanese semiconductor firms when they import raw materials, equipment and electronics components for their U.S. operations, the statement said, without elaborating.

According to the Cabinet, Washington has recognized and accepted a "Taiwan model" that Taipei proposed to allow Taiwanese companies to follow their own plans for investing in the U.S. and moving closer geographically to their American clients.

The "Taiwan model" is expected to encourage Taiwanese companies to enter the supply chain in the U.S. market and build industrial clusters there, the Cabinet said.

Taiwan has the sixth biggest trade surplus with the U.S. of any country in the world, and about 90 percent of that is from sales of semiconductors, information and communications products, and electronic components, according to the statement.

In a separate statement, the U.S. Commerce Department described the arrangement as "a historic trade deal that will drive a massive reshoring of America's semiconductor sector" and "strengthen U.S. economic resilience, create high-paying jobs, and bolster national security."

Beyond the tech sector, the reduction of the import duty on Taiwanese goods imported to the U.S. to 15 percent without stacking them on existing MFN rates should help make Taiwan's non-tech sectors more competitive, as they will now be on an equal footing with Japan, South Korea and the EU, the Cabinet said.

Taiwan has also secured the most favorable treatment for other items such as auto parts, wooden furniture and aircraft components under Section 232, and Taipei and Washington have agreed to set up a negotiation mechanism under Section 232.