The US and Taiwan have signed an agreement that will see a multi-billion dollar investment into domestic development of semiconductors and related infrastructure. The US Department of Commerce announced that Taiwanese businesses will make an upfront investment of at least $250 billion into their US production capacity, while Taiwan’s government will provide credit guarantees of at least another $250 billion in support of the semiconductor industry and supply chain in the US.

In exchange, Taiwan will receive a better deal on tariffs. Reciprocal tariffs will be limited to 15 percent, compared with the previous 20 percent rate. Generic pharmaceuticals and their generic ingredients, aircraft components, and unavailable natural resources will be not be subjected to reciprocal tariffs under the arrangement. Taiwanese companies with US production will also see increased import amounts without being charged duties under the Section 232 framework.

According to reports from CNBC, Taiwan Semiconductor Manufacturing Company (TSNC) is already in position to take advantage of the new trade agreement with further expansion in Arizona. The major Taiwanese chip manufacturer had previously committed to investing $100 billion in its US operations over four years. Commerce Secretary Howard Lutnick told CNBC in an interview that the current US government wants to bring 40 percent of Taiwan’s semiconductor supply chain stateside, continuing to use tariffs as an incentive. “If they don’t build in America, the tariff’s likely to be 100 percent,” Lutnick said.