The most recent agreement in the broad Trump tariff proposal that was unveiled in April to reduce trade disparities HONG KONG: In exchange for $250 billion in fresh investments in the US IT sector, the US and Taiwan secured a trade agreement on Thursday that lowers tariffs on Taiwanese exports. Since he launched a comprehensive tariff plan in April of last year to address trade imbalances, President Donald Trump has negotiated a number of agreements, including those with the European Union and Japan. In an effort to improve relations with the second-biggest economy in the world, Trump also has a one-year trade truce with China.
Tariffs: 32% to 15%
Trump later reduced the duty on Taiwanese imports from 32% to 20%. The new deal lowers the tariff rate to 15%, which is the same as what is applied to other Asia-Pacific trading partners of the United States, like South Korea and Japan. The U.S. Department of Commerce stated in a statement that the agreement with Taiwan will create a “economic partnership” to build a number of “world-class” industrial parks in the United States to support the expansion of domestic production. It is “a historic trade deal that will drive a massive reshoring of America’s semiconductor sector,” according to the government.
In a statement, the Taiwanese government confirmed important aspects of the agreement, stating that the “Taiwan model” will go to the United States and help the island’s technology sector become more globally competitive while strengthening strategic ties between the two countries.
$250 spent in the United States
The executive branch of Taiwan said that the island’s businesses would invest $250 billion in sectors like energy, electronics, and artificial intelligence applications. Taiwanese semiconductor manufacturers who invest in the United States will also receive favorable tariff treatment, including exemptions, according to the Commerce Department, which also announced that it will lower tariffs on the island nation and exempt some imports, including generic medications and aircraft parts.
Beijing, which maintains that Taiwan is a part of China, mocked the pact the day before it was made public, calling it “an economic plunder” on Taiwan by the United States.
TSMC will oversee investments
The agreement coincided with Taiwan-based TSMC, the largest computer chipmaker in the world, announcing intentions on Thursday to boost capital expenditures by up to nearly 40% this year after reporting a 35% gain in net profit for the most recent quarter due to the surge in artificial intelligence. Taiwan Semiconductor Manufacturing Corp., a significant supplier to businesses like Apple and Nvidia, declared a net profit of 506 billion new Taiwan dollars ($16 billion) for the October–December quarter, exceeding experts’ projections by 35% over the same period last year.
TSMC reported on Thursday that its revenue for the most recent quarter was over 1.046 trillion new Taiwan dollars ($33 billion), a 21% increase over the same period last year. TSMC stated that it intends to increase its capital expenditure budget from roughly $40 billion to $52 billion–$56 billion for 2026. The company’s strong position in the AI-driven market is demonstrated by the 59% increase in its Taiwan-listed shares over the last 12 months. Alphabet, Microsoft, Meta, and other IT behemoths are investing heavily in AI infrastructure.
High demand
TSMC’s chief financial officer, Wendell Huang, stated on a conference call, “We anticipate our business to be supported by continuous strong demand for our leading edge process technologies.”
He predicted that during the next three years, spending will be “significantly higher.” TSMC chairman and CEO C. C. Wei said that he is certain that the increasing customer demand is genuine when asked about worries about an AI bubble, as detractors point to skyrocketing investments that might not pay out. Wei remarked, “I’m also really anxious about it, you bet.” “AI exists. Not only is it genuine, but it’s beginning to permeate our everyday existence.” TSMC is currently worth more than Samsung Electronics and Alibaba, with a market capitalization of almost $1.4 trillion, calculated by multiplying the total outstanding shares by the share price. It is the most valuable listed corporation in Asia.
This month, Alphabet, the parent company of Google, surpassed $4 trillion in market capitalization, making it the fourth Big Tech company to do so after Nvidia, Apple, and Microsoft. However, concerns about an AI bubble had occasionally caused sell-offs. In an effort to build a fabrication plant cluster and satisfy high customer demand, TSMC has committed to investing around $165 billion in the United States and announced on Thursday that it is accelerating the development of new factories in Arizona. According to a recent research by Morningstar experts, TSMC, a major benefactor of AI, has an optimistic outlook due to its commanding share in the production of cutting-edge chips.
According to Morningstar analysts, “it (TSMC) is immune from market share shifts because almost every AI company relies on TSMC to make chips ranging from application-specific integrated circuits to GPUs (graphics processing units).” “Strong pricing power results from this reliance.” Even if there are any brief declines in demand, TSMC has substantial buffers because to a “robust backlog from deep-pocketed customers,” according to the company.
