The U.S. and Taiwan recently reached a historic trade deal. Taiwanese companies will invest at least $250 billion in U.S. semiconductor manufacturing. Taiwan Semiconductor Manufacturing Company, the world’s largest chipmaker, pledged $100 billion in U.S. investment in 2025. Taipei will provide an additional $250 billion in credit guarantees to Taiwanese companies.
In return, the Trump administration will cut tariffs on Taiwanese products to 15 percent. The deal also eliminates tariffs on Taiwanese pharmaceuticals and pharmaceutical ingredients, airplane components, and certain natural resources.
This deal offers national and international security benefits. It also signals growing cooperation between Washington and Taipei, contrary to the narrative that the Trump administration is looking to abandon the island. However, the agreement faces political headwinds in Taiwan.
Beijing voiced opposition to the trade deal. As I always say, it’s a good sign if China is upset. Guo Jiakun, a Chinese Foreign Ministry spokesperson, said the following:
Taiwan manufactures about 60 percent of the world’s semiconductors and over 90 percent of the most advanced chips. Nearly 45 percent of U.S. logic chip imports come from the self-governing island. Semiconductors power practically everything, from everyday devices and medical technology to data centers and military systems.
A conflict involving Taiwan, whether a blockade or full-scale invasion, would cause major disruption to the global semiconductor supply chain, impacting the world economy. This deal mitigates supply chain risks by helping to reshore chip manufacturing to the U.S.
Commerce Secretary Howard Lutnick stated that “the objective is to bring 40 percent of Taiwan’s entire semiconductor supply chain and production to the U.S.” by 2029. While it remains uncertain whether such a significant portion of the island’s chip sector will relocate to the U.S., the production of some of the most advanced chips is expected to move to the U.S. in the near term.
The deal also gives the U.S. a major boost in the AI race and paves the way for a closer AI partnership between Washington and Taipei. Access to state-of-the-art AI chips is integral to developing efficient, resilient, and advanced AI systems.
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Cheng Li-wun, chairperson of Taiwan’s China-friendly opposition Kuomintang (KMT), criticized the deal, claiming it would “hollow out” Taiwan’s semiconductor industry and that Taiwan had to “pay a heavy price” to reach a 15 percent tariff rate.
Peng Qing’en, spokesperson for China’s Taiwan Affairs Office, used the same language to denounce the U.S.-Taiwan trade deal.
Critics warn that offshoring Taiwan’s chip production could carry security implications for the island. They argue that once production is relocated to the U.S., Washington might become less committed to defending Taiwan against Chinese militarism.
There is no evidence that this deal will weaken Taiwan’s semiconductor industry or American resolve. Rather, it aims to protect Taiwan’s chip sector while boosting American manufacturing. It is the next step in strengthening U.S.-Taiwan economic relations amid Chinese coercion. Taiwanese companies will play an increasingly important role in the U.S. economy and will benefit greatly from American support.
The U.S. backs a free Taiwan for strategic reasons that extend well beyond semiconductors. Taiwan is a critical link in the First Island Chain. If Taiwan were to fall, it would deal a massive blow to U.S. deterrence and would allow China to project its power farther into the Pacific. Such a scenario would pose an immediate risk to regional allies and our national security.
A military conflict in the Taiwan Strait would also disrupt maritime trade, with severe consequences for global supply chains. Over 20 percent of global maritime trade, around half of the world’s container traffic, and 88 percent of the largest ships by tonnage pass through the Taiwan Strait.
The fate of the trade deal is now in the hands of Taiwan’s KMT-controlled Legislative Yuan (LY). By law, the LY is required to review trade agreements. The KMT could request the Lai administration to renegotiate portions of the deal — or worse, scrutinize the deal so much as to block its implementation.
Keep an eye on the KMT. They’re emboldened. Instead of focusing on the island’s security amid Chinese military exercises and drone incursions, Taiwan’s opposition has repeatedly blocked the special defense budget — six times and counting — and is pursuing an impeachment against President Lai that is bound to fail. They’re more interested in political theater, obstruction, and appeasing China.
I hope Washington is watching closely and is prepared to respond if Taiwan’s opposition tries to undermine this crucial agreement.
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