The U.S. and Taiwan have reached a trade agreement to build chips and chip factories on American soil, the Department of Commerce announced on Thursday.
As part of the agreement, Taiwanese chip and technology companies will invest at least $250 billion in production capacity in the U.S., and the Taiwanese government will guarantee $250 billion in credit for these companies.
In exchange, the U.S. will limit reciprocal tariffs on Taiwan to 15%, down from 20%, and commit to zero reciprocal tariffs on generic pharmaceuticals, their ingredients, aircraft components, and some natural resources.
Taiwan Semiconductor has bought land and could expand in Arizona as part of this deal, Commerce Secretary Howard Lutnick told CNBC's Brian Sullivan in an interview on Thursday.
"They just bought hundreds of acres adjacent to their property," Lutnick said. "I'll let them go through with their board and give them time."
The announcement added that future tariffs under the Section 232 framework will have some exceptions for companies that are building chips in the U.S. Taiwanese companies building new U.S. chip fabs — such as TSMC — will be able to import up to 2.5 times the amount of capacity they are building while the factories are under construction, without paying tariffs under the framework.
Taiwanese auto parts, lumber, and related products will also avoid tariffs over 15% under Section 232, the announcement said.