The United States and Taiwan have agreed on a deal to lower tariffs imposed on goods imported from the two countries and a commitment from the island nation to invest billions in manufacturing facilities on U.S. soil.

Under the agreement, Taiwanese companies may increase semiconductor and technology manufacturing financing and supply chain investment by as much as $500B, the U.S. Commerce Department announced Thursday.

Businesses based on the self-governed island are now required to commit at least $250B in direct investments to expand its U.S. semiconductor, energy and artificial intelligence operations.

The island will also provide credit guarantees of at least $250B toward additional investments and support for the expansion of the semiconductor supply chain.

A timeline for this investment was not included in the announcement.

In addition, Taiwan and the U.S. have agreed on a 15% tariff rate cap on most goods traded between the two countries, according to the announcement.

Taiwanese semiconductor manufacturers investing in the U.S. will have some of their semiconductor imports exempt from tariffs normally levied under special national security tariff regulations.

The U.S. also will lower tariffs on generic pharmaceuticals and generic pharmaceutical ingredients imported from Taiwan to 0%.

The U.S. previously imposed a 20% rate on imports from Taiwan, Japan and South Korea. Both Japan and South Korea struck similar deals to lower tariffs to 15% in 2025.

The plan is for these Taiwanese companies to cluster development at new industrial parks within the U.S.

In 2025, Taiwanese companies had already begun to ramp up investment in the U.S., including a previous $100B commitment from Taiwan Semiconductor Manufacturing Co. The company is set to expand its investment in Arizona following the deal with Taiwan, CNBC reported.

The U.S. also plans to expand investments in Taiwanese industries, including semiconductors, artificial intelligence, defense and biotechnology.

The Trump administration said it will provide land, utility infrastructure, tax incentives and visa support to ensure these companies can follow through on their investments.

The deal comes as the Supreme Court has yet to make a decision on Trump's tariff policy. If the court rules against the president's handling of tariffs, it could have serious implications on his second administration's aggressive tariff regime.

Taiwan has seen a boom in its domestic economy as its AI industry and tech exports have grown. The island revised its gross domestic product growth forecast last year to roughly 7.3%.

The U.S. increased its annual trade surplus from these tech imports to a record $150B last year.