Taipei: Agreements reached between Taipei and Washington to lower tariffs and grant Taiwan-exported semiconductors and related products the most favorable treatment demonstrate that the United States regards Taiwan as a “core strategic partner,” an academic said Friday. Under tentative agreements reached Thursday (U.S. time), the 20 percent tariff rate previously imposed by the U.S. on Taiwan will be reduced to 15 percent, putting Taiwan on par with major U.S. trading partners such as Japan, South Korea, and the European Union, Taiwan’s Cabinet said. The new tariff rate will not be stacked on top of existing most-favored-nation (MFN) tariffs, the Cabinet added on Friday.

According to Focus Taiwan, Chang Chien-yi, president of the Taiwan Institute of Economic Research, expressed encouragement by the results of the Taiwan-U.S. trade talks. Taiwan is the first country to secure most favorable treatment under Section 232 of the U.S. Trade Expansion Act, pending a U.S. government investigation into whether foreign semiconductors and certain goods should be subject to national security tariffs. Such treatment will also extend to lumber and auto parts, providing a boost to Taiwan’s traditional industries.

Chang highlighted that Taiwan’s traditional industries have faced challenges due to higher free trade agreement (FTA) coverage by Japan and South Korea, which made competition difficult. The deal, combined with a two-way investment mechanism, is close to an FTA, marking a milestone that emphasizes Taiwan’s strategic partnership with the U.S.

Taiwanese companies will invest at least US$250 billion in U.S. sectors like semiconductors, energy, and artificial intelligence. The Taiwanese government will also offer credit guarantees of at least US$250 billion to support further investment by Taiwanese enterprises in the U.S. semiconductor sector. Additionally, Taiwan will promote U.S. investment in its semiconductor, AI, defense, and biotechnology sectors to enhance market access for American companies, according to the U.S. Commerce Department.

Lien Hsien-ming, president of the Chung-Hua Institution for Economic Research, noted that the investment agreement secured better terms compared to Japan, South Korea, and the European Union. While the government will provide credit guarantees, it will not commit to specific investment amounts in the U.S., allowing companies to make decisions based on market conditions.

Chang also warned about potential negative impacts on some industries, such as the waiver of tariffs on U.S.-made automobiles, which could pose challenges for domestic automakers.