Taiwan Secures 15% Tariff Cap; US Pledges Major Investment in '5 Trusted Industries' to Secure Global Supply Chain

Regarding the results of Taiwan-UStariff negotiations, Executive Yuan Vice PremierZheng Ligun (鄭麗君) today (16th) pointed out at a press conference at the Representative Office in the United States that according to think tank assessments, the current 15% tax rate compared to 32% in April last year has reduced the impact on Taiwan's industries, exports, related employment, and GDP growth by 80%. She also mentioned that the US will expand investments in Taiwan's "five major trusted industries," including semiconductors, artificial intelligence, defense technology, security and surveillance, next-generation communications, and biotechnology industries. US financial institutions such as the Export-Import Bank of the United States and the US International Development Finance Corporation will also cooperate with Taiwan when appropriate.

Zheng Ligun stated that the biggest challenge throughout the negotiation process was that Taiwan is the US's 6th largest trade deficit country and also the most important semiconductor manufacturing country for the United States. This can be seen from the data showing that up to 90% of the Taiwan-US trade deficit comes from semiconductor derivatives and ICT products. Therefore, negotiations between Taiwan and the US must simultaneously address reciprocal tariffs and various Section 232 tariffs related to US national security objectives, conducting consultations with both the US Trade Representative's Office and the Department of Commerce.

Zheng Ligun pointed out that first, the US reciprocal tariffs on Taiwan have been successfully reduced from 32% in April and 20% in August to the current 15% non-cumulative rate, which is the most favored treatment among deficit countries. According to think tank assessments, this tax rate compared to 32% in April last year reduces the impact on Taiwan's industries, exports, related employment, and GDP growth by 80%. She also emphasized that Taiwan's main competitors Japan and South Korea - the US-Korea had an FTA in the past, and Japan-Korea also once had a first-phase trade agreement. Previously, Taiwan's industrial items had higher tariff rates for exports to the US compared to Japan and South Korea. After this negotiation, Taiwan's tariffs for exports to the US are now aligned with those of Japan and South Korea, standing on equal footing.

Zheng Ligun gave an example: machine tools exported to the US have an MFN rate of 4%. Because the US-Korea has an FTA, Korea's export tariff to the US is zero. The US-Japan has a trade agreement, so Japan's export tariff to the US is 2.6%. Now for machine tools, Taiwan, Japan, and Korea all face 15%, with Taiwan aligned to the same footing as Japan and Korea. This is the first time in over 10 years that Taiwan has achieved the same footing as major competitors.

Zheng Ligun mentioned that the so-called 15% non-cumulative is given by the US to countries like the EU, Japan, Korea, and Switzerland, with the same calculation method. When the US MFN plus reciprocal tariffs is less than 15%, the tax rate is set at 15%. If the MFN itself is greater than 15%, it is calculated from the MFN, using the same non-cumulative method as all countries. Taiwan also secured over 1,000 items of reciprocal tariff exemptions from the US.

Zheng Ligun said that the US hopes to build a domestic AI supply chain, while Taiwan takes "rooted in Taiwan, globally deployed" as its most important national overall strategy. In addition to expanding Taiwan's investment in the US, both sides have also committed to establishing a "bilateral investment mechanism." The US will expand investments in Taiwan's "five major trusted industries," including semiconductors, artificial intelligence, defense technology, security and surveillance, next-generation communications, and biotechnology industries. US financial institutions such as the Export-Import Bank of the United States and the US International Development Finance Corporation will also cooperate with Taiwan when appropriate.

Zheng Ligun reiterated that since both sides are still conducting legal review, Taiwan will choose another time to sign documents with the US Trade Representative's Office. After the agreement is signed, detailed explanations will be provided to the public, and the complete agreement text will be submitted to Congress for review according to legal procedures in the future.