Taipei: The US$250 billion credit guarantee Taiwan’s government has agreed in a tariff deal with the United States is expected to help enterprises raise funds to facilitate their investments in the U.S., according to experts.

According to Focus Taiwan, Cathay United Bank chief economist Lin Chi-chao explained that large corporations, like the chipmaking giant Taiwan Semiconductor Manufacturing Co. (TSMC), which has already committed US$165 billion in U.S. investments, might not require any credit guarantee. However, Lin pointed out that smaller-sized companies could benefit from this government support to enhance banks’ willingness to provide loans.

On Friday, the Cabinet announced that Taipei and Washington have reached an agreement to lower tariffs on Taiwanese goods entering the U.S. from 20 percent to 15 percent, without stacking them on the existing most-favored-nation (MFN) rates. As part of the deal, Taiwanese semiconductor, electronics manufacturing service (EMS), AI, and energy companies will invest US$250 billion directly in the U.S.

Taiwan’s government has pledged to provide up to US$250 billion in credit guarantees to financial institutions to support U.S.-bound investments by companies in the semiconductor and information and communication technology (ICT) sectors. Echoing Lin’s views, Fubon Financial Holding Co.’s chief economist Lo Wei stated that through a credit guarantee mechanism, smaller companies might enjoy lower borrowing costs. This would make it easier for TSMC and other Taiwanese tech firms, including server makers, to establish overseas industrial clusters.

Lo further mentioned that the credit guarantee the government has pledged is feasible, citing Taiwan’s existing mechanisms that support domestic small and medium-sized enterprises. Lin provided an example of how the system works: if a company borrows from a bank and the government agrees to guarantee 70 percent of the loan, the government would cover that portion if the borrower defaults, while the bank would absorb the remaining 30 percent.

On Friday, Cabinet spokesperson Michelle Lee stated on social media that the credit guarantee aims to help enterprises extend their reach globally and does not imply that the government will indiscriminately distribute funds.