By Trevor Hunnicutt WASHINGTON, Jan 15 (Reuters) – The U.S. and Taiwan clinched a trade deal on Thursday that cuts tariffs on many of the semiconductor powerhouse's exports, directs new investments in the U.S. technology industry and risks infuriating China. The deal deepens the Trump administration's ties with Taipei at a critical time as China ratchets up pressure on the island and Washington has worked to avoid an all-out trade war with Beijing. Under the long-negotiated deal, Taiwanese chipmakers like TSMC that expand U.S. production will get a lower tax rate for semiconductors they import into the U.S. The U.S. will also lower a set of broad tariffs that apply to most other Taiwanese exports to the U.S. from 20% to 15%. Generic pharmaceuticals, aircraft components and "unavailable natural resources" will face a 0% tariff, the Commerce Department said. In exchange, Taiwanese technology companies, such as TSMC, will make investments totaling at least $250 billion to increase production of semiconductors, energy and artificial intelligence in the United States. That includes $100 billion already committed by TSMC in 2025, with more to come, according to U.S. Commerce Secretary Howard Lutnick. Taiwan will also guarantee another $250 billion in credit to make additional investments possible, the Trump administration said. The investment boost in chip production will likely provide more business for TSMC's major suppliers, which include major chip manufacturing toolmakers such as ASML, Lam Research and Applied Materials. It should also provide a boost to smaller materials suppliers of chemicals and materials such as Sumitomo Corp and DuPont spinoff Qnity Electronics. Many of those firms have long had a presence in Arizona due to Intel's major operations there but have expanded facilities with TSMC's arrival. Shares of chip company Nvidia, which depends on TSMC for manufacturing, rose more than 2%, keeping most of its gains from earlier in the day. TAIWAN'S SEMICONDUCTOR POWERHOUSE SET TO EXPAND IN U.S. Under the agreement, chipmakers that expand in the U.S. will be able to import up to 2.5 times their new capacity of semiconductors and wafers with no extra tariffs during an approved construction period, with preferential treatment on chips that exceed that quota. Meanwhile, chipmakers that have already built chip production plants in the U.S. can import 1.5 times their new U.S. production capacity without paying additional tariffs. U.S. President Donald Trump on Wednesday imposed a 25% tariff on certain AI chips, such as the Nvidia H200 AI processor, but he left most other chips untouched, for now. TSMC, which reported a forecast-smashing 35% jump in fourth-quarter profit earlier on Thursday, is speeding up an ongoing expansion to meet demand in both Taiwan and Arizona. In Arizona, Chief Executive C.C. Wei said the company is applying for permits to begin construction on a fourth factory and the first advanced packaging plant. The company bought additional land in Arizona, he told a press briefing. TSMC's U.S.-listed shares rose 5% following its earnings. Taiwan has offered to help the U.S. replicate the island's success in building tech clusters around dedicated science parks. In the United States, efforts to build such clusters have faced both labor and skill shortages. Tariffs on auto parts, timber, lumber and wood products from Taiwan will total no more than 15% under the deal. The deal is subject to review in Taiwan's parliament, Taipei has said. The U.S. Supreme Court is expected to rule soon on the president's authority to impose broad tariffs without Congress. It's not clear how the Taiwan or other trade deals Trump struck would change if the court rules many tariffs are unconstitutional. (Reporting by Trevor Hunnicutt, David Lawder, Stephen Nellis, Ismail Shakil and Christian Martinez; Editing by Lisa Shumaker)
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