The United States and Taiwan reached a trade agreement that lowers headline tariffs on Taiwanese imports to 15% from the previous 20%, and far below the 32% initially proposed in April of last year. Under the framework of the deal, several categories of goods will now face no tariffs at all, including generic pharmaceuticals, aircraft components, and what are described as “unavailable natural resources.” The agreement also carves out preferential treatment for the semiconductor sector, offering lower or even zero tariffs on chips and chipmaking equipment for companies that expand production inside the United States, including Taiwan Semiconductor Manufacturing Company, better known as TSMC.
Beyond tariffs, the deal carries a significant investment component. Taiwanese companies have pledged to invest at least $250 billion in the U.S., with $100 billion of that total already committed by TSMC to expand domestic chip production. Additional investments are expected to target energy infrastructure and artificial intelligence as both sides seek to deepen ties in the rapidly growing technology sector. Taiwan is also expected to guarantee another $250 billion in credit to help accelerate further investment activity. Markets appeared to respond favorably to the announcement, with tech stocks receiving an added boost on Friday, building on optimism from the prior session after TSMC’s strong fourth-quarter results helped ease concerns surrounding elevated AI-related valuations.
While the agreement was welcomed by much of the technology sector, it drew swift criticism from China. Responding to the announcement, reports indicate China’s Ministry of Foreign Affairs spokesman Guo Jiakun said, “China consistently and resolutely opposes any agreement signed between countries with which it has diplomatic relations and the Taiwan region of China.” The reaction mirrors past responses from Beijing following previous instances of economic cooperation between the U.S. and Taiwan, as China continues to assert its claim over the island. The broader pattern of strategic competition between the U.S. and China remains firmly in place, with this deal carrying not just economic significance but also security implications, underscored by Lutnick’s comment that “our president is the key to protecting their country.”
China also made trade news of its own, reaching an agreement with Canada that will significantly reduce tariffs on Chinese electric vehicles in exchange for lower Chinese duties on Canadian canola. Under the arrangement, Canada will initially allow up to 49,000 Chinese EVs at a tariff rate of 6.1%, sharply reduced from the 100% tariff imposed in 2024. In return, China is expected to cut its tariffs on Canadian canola to roughly 15% from the current 84% by the beginning of March. The deal is also expected to include tariff relief for other Canadian exports such as seafood, pulses, and additional products that had been subject to punitive measures.
Energy cooperation is another component of the Canada-China agreement. Prime Minister Mark Carney said Canada plans to double its energy grid over the next 15 years, highlighting opportunities for Chinese investment and partnership in that expansion. He also pointed to Canada’s plans to grow liquefied natural gas exports to Asia in the years ahead. The announcement had an immediate impact on agricultural markets, sending canola futures sharply higher, with the March contract climbing to a fresh six-week high.
