Trump team nears Taiwan trade deal with more US chip investment

[WASHINGTON] The Trump administration is close to a trade deal with Taiwan that would lower American tariffs on goods from the self-governed island and significantly expand Taiwan Semiconductor Manufacturing Company (TSMC)’s planned investment in chip production on US soil, according to sources familiar with the matter.

Duties on Taiwanese imports would fall to 15 per cent from the current level of 20 per cent, according to one of the sources. That level would put the Taiwan shipments on par with those from Japan and South Korea, which reached their own agreements last year.

Under the deal taking shape, TSMC would pledge to build at least four more chip manufacturing plants in Arizona, adding to the six factories and two advanced packaging facilities it has already promised to open there, the source said.

The commitments would add to existing plans for as much as US$165 billion in US investment by TSMC, the world’s top producer of advanced chips used in artificial intelligence (AI) and a company that has come under increasing attention in Washington because Taiwan faces military aggression from China.

With the cost of building a single fab upwards of US$20 billion, TSMC’s additional investment would likely approach or surpass US$100 billion. The four extra fabs would be completed in the 2030s, the source said. The New York Times reported earlier Monday (Jan 12) on the agreement nearing completion, saying a framework could be announced this month.

If a deal is finalised, it’s unclear how quickly TSMC would be able to fulfil its commitment to drastically expand its US manufacturing presence.

The White House, Office of the US Trade Representative and Commerce Department did not immediately respond to requests for comment. TSMC did not immediately respond to a request for comment. Taiwan’s Cabinet spokesperson and the Office of Trade Negotiations did not immediately reply to a request for comment.

A signed pact would culminate months of talks between US President Donald Trump’s team and the Taiwanese government, which has repeatedly said a deal was close. Taipei would secure a reduced tariff rate that aligns with the levies the US applies to imports from its neighbours, Japan and South Korea. Trump would gain another investment pledge from a major overseas manufacturer, which he could tout as another win for his trade policy.

Trump administration officials, including Commerce Secretary Howard Lutnick, had laid out their expectations for Taiwan to promise significant additional investments by TSMC in chip production on US soil. Any agreement with Taipei risks provoking China, which claims the island as part of its territory, a view Taiwan rejects.

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Taiwan has been trying to conclude a deal with the US before Trump meets Chinese leader Xi Jinping in China, according to a senior official in Taipei who declined to be identified discussing the sensitive issue. The US leader is expected to visit China in April.

Still, much remains uncertain about the benefits of a potential deal and the possibility of quickly clinching it. The Supreme Court is set to rule on the legality of Trump’s global tariffs as soon as Wednesday. Overturning the levies could rob the president of a crucial lever he’s wielded in trade negotiations.

Since announcing sweeping tariffs on dozens of trading partners last April, the Trump administration has negotiated several deals with major economies, including Japan, South Korea and the European Union, to reduce levies on their goods in exchange for investment promises in fields, including electronics, critical minerals and pharmaceuticals. BLOOMBERG