The U.S. and Taiwan have reached a trade agreement to build more microchip factories on American soil.
The U.S. Department of Commerce announced that Taiwanese microchip and technology companies will invest an additional $250 billion U.S. to build production capacity in the U.S.
The Taiwanese government will guarantee $250 billion U.S. in credit for the investments made in America by companies such as Taiwan Semiconductor Manufacturing Co. (TSM).
In exchange, the U.S. will limit tariffs on Taiwan to 15%, down from 20% previously.
The administration of U.S. President Donald Trump has also pledged zero tariffs on generic pharmaceuticals, aircraft components, and some natural resources from Taiwan.
Taiwan Semiconductor is already building major manufacturing plants in Arizona and could expand those facilities as part of the deal.
Taiwan Semiconductor has pledged about $40 billion U.S. to produce microchips in America for companies such as Apple (AAPL) and Nvidia (NVDA).
In announcing the trade deal, the Trump administration threatened that Taiwan companies that do not build in the U.S are likely to face a 100% import tariff.
Trump has said that his government’s objective is to shift 40% of Taiwan’s semiconductor supply chain to the U.S.
Currently, about three-quarters (75%) of all microchips and semiconductors in the world are made in Taiwan.
While Trump hailed the new trade agreement and investment from Taiwan as a victory, the deal is likely to anger China, which claims ownership over Taiwan.
China began the year by conducting military exercises off the coast of Taiwan.
TSM stock has risen nearly 60% over the past 12 months to trade at $341.64 U.S. per share in New York.
