US and Taiwan reach trade deal, with semiconductor chips and China in focus

Trade Deal Overview - The U.S. and Taiwan have finalized a trade deal that reduces tariffs on Taiwanese semiconductor exports and encourages new investments in the U.S. technology sector, while potentially escalating tensions with China [1][2]. Tariff Reductions - Tariffs on Taiwanese semiconductor imports and related manufacturing equipment will be lowered, with broad tariffs on other Taiwanese exports to the U.S. decreasing from 20% to 15% [2]. - Generic pharmaceuticals, aircraft components, and certain natural resources will face a 0% tariff [3]. Investment Commitments - Taiwanese companies are set to invest $250 billion in U.S. semiconductor, energy, and artificial intelligence production, including $100 billion already pledged by TSMC by 2025 [4]. - Taiwan will also provide an additional $250 billion in credit to support further investments [4]. Supply Chain Impact - The deal aims to relocate 40% of Taiwan's chip supply chain and production to the U.S., with significant tariff implications if production does not occur domestically [5]. - Increased chip production is expected to benefit major suppliers to TSMC, including ASML, Lam Research, and Applied Materials, as well as smaller suppliers like Sumitomo Corp and Qnity Electronics [6]. Market Reactions - Following the announcement, shares of Nvidia rose over 2%, while shares of ASML, Lam, Applied Materials, and Qnity increased by approximately 4% to 6% [7].