The United States and Taiwan are reportedly set to finalise a trade agreement that will reduce tariffs from 20% to 15%. In return, Taiwan has committed $500 billion towards US investments, with half designated for direct investment in American manufacturing and the other half allocated as credit guarantees for additional US projects.

This deal, expected to be signed today, includes significant commitments from Taiwanese chipmakers such as TSMC. These companies have pledged $250 billion in chip investments and credit guarantees, primarily focused on establishing fabrication plants (FABs) in Arizona. Additionally, the agreement introduces a quota system for chip exports, facilitating the tariff reduction.

Under the pact, the US will implement a zero percent reciprocal tariff on generic pharmaceuticals, their ingredients, aircraft components, and certain natural resources that are not available domestically.

US Commerce Secretary Howard Lutnick emphasised that the goal is to enhance US self-sufficiency in semiconductor manufacturing. He described the agreement as a major step towards achieving this, not only in terms of chip production but also related components. Lutnick noted the ambition to bring 40% of Taiwan’s semiconductor manufacturing capacity to the US during the current presidential term.

This agreement presents important implications for forex traders, particularly those monitoring USD-TWD dynamics and sectors linked to semiconductor manufacturing and trade policy.

Original Source: Adam Button of investinglive.com