The US claims it just strongarmed Taiwan into spending $250 billion on American chip manufacturing

The US just lowered Taiwan’s tariffs in exchange for a massive domestic chipmaking promise, the Commerce Department announced on Thursday. Under the deal, tariffs on goods from Taiwan will decrease from 20 to 15 percent, while Taiwanese technology companies will invest $250 billion into building and expanding chipmaking facilities in the US, supported by at least $250 billion in credit offered by Taiwan’s government.

Last year, President Donald Trump threatened to impose a 100 percent tariff on chips and semiconductors not made in the US, something that Commerce Secretary Howard Lutnick tells CNBC is still on the table. “That’s what they get if they don’t build in America, the tariff’s likely to be 100 percent,” Lutnik says. Trump also began imposing a 25 percent tariff that will allow the US government to take a cut of Nvidia and AMD’s advanced AI chip sales in China.

The deal also states that Taiwanese companies building US-based chipmaking factories can import up to 2.5 times the planned capacity without paying extra tariffs “during the approved construction period.” Once construction is complete, the companies can import 1.5 times their US production capacity, tariff-free. The US will also eliminate reciprocal tariffs on generic pharmaceuticals, their ingredients, aircraft components, and certain natural resources.

When asked whether Taiwan acknowledged the potential risks posed by China to its chipmaking business, Lutnik tells CNBC that the country struck the agreement because “they need to keep our president happy,” adding that “Donald Trump is vital to protecting them.”

Taiwan Semiconductor Manufacturing Co. — the world’s biggest chipmaker — already committed to investing at least $100 billion to expand chip manufacturing in the US last year, and Bloomberg reports it will be one of the companies leading the new $250 billion investment. Lutnik tells CNBC that TSMC may expand further in the US, as it “bought hundreds of acres adjacent to their property” in Arizona, where the company plans on building six semiconductor fabs.