Hong Kong, Jan 16 (AP) 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 one-year trade truce with China to stabilise ties with the world's second largest economy.

Trump 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 Asia-Pacific region such as Japan and South Korea.

In a statement, the US Department of Commerce said the deal with Taiwan would establish an “economic partnership” to create several “world-class” US-based 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 America's semiconductor sector.” The 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 island's technology industry while deepening strategic cooperation between the two nations.

Taiwan's executive branch said the island's companies would specifically invest USD 250 billion in industries such as semiconductors, artificial intelligence applications and energy.

In 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 Taiwan.

TSMC to lead investments The deal came just when Taiwan-based TSMC, the world's largest computer chipmaker, on Thursday announced plans to increase its capital spending by as much as nearly 40% this year after it reported a 35 per cent jump in its net profit for the latest quarter thanks to the boom in artificial intelligence.

Taiwan 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 October-December quarter, a 35 per cent surge from a year earlier, better than analysts' estimates.

TSMC said Thursday that its revenue in the last quarter increased 21per cent from a year earlier to more than 1.046 trillion new Taiwan dollars (USD 33 billion).

TSMC said it plans to boost its capital expenditure budget to USD 52 billion-USD 56 billion for 2026, up from about USD 40 billion last year.

The company's Taiwan-listed shares have jumped 59 per cent over the past 12 months, reflecting its strong position in the AI-driven market.

Other tech giants including Microsoft, Meta and Alphabet are spending big on investments in AI infrastructure.

“We expect our business to be supported by continuous strong demand for our leading edge process technologies,” Wendell Huang, TSMC's chief financial officer, said in a conference call. He said spending would be “significantly higher” in the next three years.

Asked 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.

“I'm also very nervous about it, you bet,” said Wei. “AI is real. Not only real, it's starting to grow into our daily life." With a market capitalisation -- total outstanding shares times share price -- of approximately USD 1.4 trillion, TSMC is currently more valuable than Samsung Electronics and Alibaba. It is Asia's most valuable listed company.

Alphabet, Google's 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 sell-offs.

TSMC has pledged around USD 165 billion of investments in the US and said Thursday it's 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 cutting-edge chip manufacturing, TSMC's outlook remains optimistic, analysts from Morningstar said in a recent report.

“It (TSMC) is immune from market share shifts as almost every AI company relies on TSMC to make chips ranging from application-specific 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 deep-pocketed customers," they said, even if there are any short-term drops in demand. (AP) OZ OZ