US, Taiwan sign USD 250 billion trade deal, cut tariffs on Taiwanese goods

The United States and Taiwan reached a trade deal on Thursday that cuts tariffs on Taiwanese goods in exchange for USD 250 billion in new investments in the US tech industry The deal is the latest President Donald Trump has struck such as those with the European Union and Japan since he unveiled a sweeping tariff plan last April to address trade imbalances Trump also has a oneyear trade truce with China to stabilise ties with the worlds second largest economyTrump initially set the tariff at 32 per cent on Taiwanese goods but later changed it to 20 per cent The new agreement slashes the tariff rate to 15 per cent the same as levied on other US trading partners in the AsiaPacific region such as Japan and South KoreaIn a statement the US Department of Commerce said the deal with Taiwan would establish an economic partnership to create several worldclass USbased industrial parks in order to help build up domestic production The department described it as a historic trade deal that will drive a massive reshoring of Americas semiconductor sectorThe Taiwanese government affirmed key details in the deal in a statement saying that the Taiwan model will go to the US and help expand the global competitiveness of the islands technology industry while deepening strategic cooperation between the two nations Taiwans executive branch said the islands companies would specifically invest USD 250 billion in industries such as semiconductors artificial intelligence applications and energyIn addition to cutting the tariffs on the island nation the Commerce Department said it will exempt certain imports such as generic pharmaceuticals and aircraft components from Taiwan Taiwanese semiconductor producers that invest in the US also will get favorable tariff treatments including exemptions the department said One day before the deal was announced Beijing which claims Taiwan to be part of China scoffed at it calling the agreement an economic plunder by the US on TaiwanTSMC to lead investmentsThe deal came just when Taiwanbased TSMC the worlds largest computer chipmaker on Thursday announced plans to increase its capital spending by as much as nearly 4037 this year after it reported a 35 per cent jump in its net profit for the latest quarter thanks to the boom in artificial intelligenceTaiwan Semiconductor Manufacturing Corporation a major supplier to companies including Nvidia and Apple reported a net profit of 506 billion new Taiwan dollars USD 16 billion for the OctoberDecember quarter a 35 per cent surge from a year earlier better than analysts estimatesTSMC said Thursday that its revenue in the last quarter increased 21per cent from a year earlier to more than 1046 trillion new Taiwan dollars USD 33 billion TSMC said it plans to boost its capital expenditure budget to USD 52 billionUSD 56 billion for 2026 up from about USD 40 billion last yearThe companys Taiwanlisted shares have jumped 59 per cent over the past 12 months reflecting its strong position in the AIdriven market Other tech giants including Microsoft Meta and Alphabet are spending big on investments in AI infrastructureWe expect our business to be supported by continuous strong demand for our leading edge process technologies Wendell Huang TSMCs chief financial officer said in a conference call He said spending would be significantly higher in the next three yearsAsked about concerns over an AI bubble as critics point to ballooning investments which might not pay off TSMC chairman and CEO C C Wei said he is confident that the growing demand from customers is real Im also very nervous about it you bet said Wei AI is real Not only real its starting to grow into our daily lifeWith a market capitalisation total outstanding shares times share price of approximately USD 14 trillion TSMC is currently more valuable than Samsung Electronics and Alibaba It is Asias most valuable listed company Alphabet Googles parent passed the USD 4 trillion market capitalization mark this month the fourth Big Tech company to hit that mark after Nvidia Apple and Microsoft although worries about an AI bubble had led to occasional selloffsTSMC has pledged around USD 165 billion of investments in the US and said Thursday its speeding up construction of new plants in Arizona looking to create a fabrication plant cluster and meet strong demand from clients A primary beneficiary of AI given its dominant share in cuttingedge chip manufacturing TSMCs outlook remains optimistic analysts from Morningstar said in a recent reportIt TSMC is immune from market share shifts as almost every AI company relies on TSMC to make chips ranging from applicationspecific integrated circuits to GPUs graphics processing units the Morningstar analysts said This reliance translates into strong pricing power TSMC also has strong buffers with a robust backlog from deeppocketed customers they said even if there are any shortterm drops in demandThis story has been sourced from a third party syndicated feed 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