The US will cut tariffs on Taiwanese goods following an investment pledge.

The United States said it has agreed to cut tariffs on goods from Taiwan by 15% in exchange for hundreds of billions of dollars in investment aimed at boosting domestic production of semiconductors.

The Commerce Department said the island’s semiconductor and technology enterprises have committed to “new, direct investment” of at least $250bn (£187bn).

The deal also provides tariff relief for Taiwanese.

The deal also provides tariff relief for Taiwanese semiconductor companies investing in the US.

Boosting US production of semiconductor chips, which are found in machines ranging from cars to smartphones, has been a priority for the US, as shortages during the COVID-19 pandemic have highlighted supply chain risks.

In an interview on CNBC, Commerce Secretary Howard Lutnick said the agreement would make the US “self-reliant.”

“We’re going to bring it all the way,” he said.

The US has devoted hundreds of billions of dollars in government subsidies to the semiconductor industry recently, helping it secure investment and expansion from TSMC, the Taiwanese manufacturing giant that dominates the industry.

As part of its earnings update on Thursday, the company said it was accelerating its investments in the US, where it plans to open a plant in 2024.

The factory in Arizona, which now makes chips for Nvidia, Apple, AMD, and other major US tech companies, was built with $40 billion in US government subsidies passed during the Biden administration.

Lutnick said the latest trade deal could allow the company to expand and is aimed at further developing the supply chain, which could also persuade smaller businesses to relocate to the US.

According to the Commerce Department, the Taiwan government will provide $250 billion in financing to support companies, along with direct investment from companies.

Taiwan, a self-ruled island claimed by China, had been pushing to reach a deal with the Trump administration over tariffs on its exports entering the U.S., which were set at 20% last year.

But it has been wary of demands to transfer its expertise, which some see as a safeguard against military action.

The new 15% tariff rate matches the rates the US currently charges for goods from major trading partners, such as Japan, South Korea, and the European Union.

Those rates were agreed upon in deals resulting from tariffs first announced by Trump last April, which he said were aimed at addressing trade imbalances.

The Supreme Court is currently considering requests from businesses and states in the US to eliminate the duties they claim were imposed in violation of the President’s power.

The Trump administration had previously threatened separate, sweeping tariffs on the semiconductor industry in the name of national security.

It has so far put the proposal on hold, which has drawn widespread concern from import-dependent US companies, including some in the sector.

The announcement comes as TSMC rival US chipmaker Intel has struggled to make advanced chips designed for artificial intelligence.

In a surprise move last year, the US government took a 10% stake in Intel, but the company is about to cut thousands more US positions, on top of cuts already made recently.

Overall, the semiconductor manufacturing sector cut more than 17,000 jobs last year, according to the latest data, despite government efforts to boost the industry.