Washington and Taipei have signed a trade deal lowering tariffs on Taiwanese exports to 15%, on par with those on Asian allies Japan and South Korea, while the island will open its market for U.S. goods.
Taiwan will remove or reduce 99% of tariff barriers on U.S. goods, as well as provide “preferential market access” for U.S. industrial and agricultural exports. These include autos, beef products and minerals.
Taiwan also plans to purchase over $84 billion in U.S. goods from 2025 to 2029, including liquefied natural gas and crude oil, as well as aircraft and power equipment.
The office of the U.S. Trade Representative said that Taiwan had committed to “resolve longstanding non-tariff barriers,” such as accepting U.S. vehicles built to U.S. Federal Motor Vehicle Safety Standards without any additional requirements.
This deal was first announced in January when Taiwanese chip and technology companies committed to invest at least $250 billion in production capacity in the U.S., backed by an equal amount of government credit “to facilitate additional investment by Taiwanese enterprises.”
However, Taiwan and the U.S. have shared differing views on chip supply chains.
The goal is to bring 40% of Taiwan’s entire semiconductor supply chain to the U.S. during U.S. President , Commerce Secretary Howard Lutnick told CNBC last month. He also said that Taiwan-based chip companies that don’t build in the U.S are likely to face a 100% tariff.
However, Taiwan has pushed back on that proposal, telling Washington that moving 40% of the island’s semiconductor supply chain to the U.S. was “impossible,” according to Taipei’s top tariff trade negotiator.
Vice Premier Cheng Li-chiun told local media that Taiwan’s semiconductor ecosystem, built over decades, could not simply be relocated.
Taiwan’s international expansion, including its investments in the U.S., is predicated on the notion that the industry remains’ rooted in Taiwan and continues to expand domestic investments, she said in Mandarin, translated by CNBC.
China, which considers democratically governed Taiwan a part of its territory, had criticized the January agreement, saying that the deal would “only drain Taiwan’s economic interests,” adding that the ruling Democratic Progressive Party was letting the U.S. “hollow out” the island’s key industry.
Chinese President Xi Jinping regards Taiwan’s reunification with the mainland “a historical inevitability.” Taiwan rejects those claims.
While the U.S. does not have a mutual defense treaty with Taiwan and is not obligated to defend the island, the 1979 Taiwan Relations Act states the U.S. “will make available to Taiwan such defense articles and defense services” as may be necessary to “enable Taiwan to maintain sufficient self-defense capabilities.”
The U.S. in December approved $11.15 billion in arms sales to Taiwan, among its largest deals with the island as it faces growing threats from China, drawing a sharp response from Beijing, with its foreign affairs spokesperson, Guo Jiakun, accusing the U.S. of violating the “one-China principle.”
— CNBC’s Anniek Bao and Dylan Butts contributed to this story.
Source: CNBC