U.S. Implements Tariff Reductions, Deepening Strategic Economic Partnership with Taiwan

On May 28, 2026, the U.S. Department of Commerce and the Office of the U.S. Trade Representative (USTR) published a Federal Register notice amending the Harmonized Tariff Schedule of the United States (HTSUS) to implement selected Section 232 tariff relief for certain Taiwan-origin imports entering the United States.
 
Effective retroactively to May 1, 2026, these adjustments fulfill key tariff-related elements of the Memorandum of Understanding Relating to Taiwan-U.S. Investment (MOU) signed on January 15, 2026, between the American Institute in Taiwan (AIT) and the Taipei Economic and Cultural Representative Office in the United States (TECRO). Under this historic framework, Taiwan has become the first country to secure preferential treatment under the current U.S. administration’s Section 232 tariff regime.
 
The immediate HTSUS changes include:

• Capping Section 232 tariffs on designated Taiwan-origin automobile parts, timber, lumber, and wood derivative products at a maximum rate of 15% (down from prior rates as high as nearly 27%).

• Eliminating derivative Section 232 steel, aluminum, and copper tariffs on certain civil aircraft components that are products of Taiwan, restoring them to ordinary customs duty treatment. According to Taiwanese officials, these products would revert to an average MFN duty rate of approximately 1.12%.

Why It Matters
 
The tariff action places Taiwan on par with key U.S. economic partners such as Japan and South Korea in the affected Section 232 categories, reinforcing Taiwan’s role as a trusted and strategically aligned partner in critical supply chains.
 
In exchange for these tariff reductions and to solidify the broader U.S.-Taiwan Agreement on Reciprocal Trade (ART) signed on February 12, 2026, Taiwan has committed to unprecedented market-opening measures once the agreement enters into force:

• Eliminating or reducing tariffs on 99% of U.S. industrial and agricultural exports –– including beef, dairy products, and automobiles, while addressing non-tariff barriers by accepting U.S. FDA marketing authorizations and U.S. vehicle safety standards; and

• Facilitating long-term increases in purchases of key U.S. commodities from 2025 through 2029. These include $44.4 billion in liquefied natural gas (LNG) and crude oil to diversify Taiwan’s energy security, $15.2 billion in civil aircraft and engines, and $25.2 billion in power equipment, power grids, storage facilities, and other equipment, to help reduce the bilateral trade deficit.

Beyond trade balancing, the MOU establishes a strategic economic partnership that strengthens U.S. domestic semiconductor supply chains and secures America’s technological and industrial leadership against authoritarian coercion.

Taiwan is providing at least $250 billion in credit guarantees to support its enterprises in making at least $250 billion in new direct investments in the U.S. These investments by Taiwanese semiconductor and technology enterprises will significantly expand U.S. domestic advanced chip, energy, and AI manufacturing capacity.

Next Step

As the U.S.-Taiwan strategic economic partnership continues to deepen, this large-scale capital and technological investment highlights the urgent need for the U.S. Senate to swiftly pass the United States-Taiwan Expedited Double-Tax Relief Act (S.199). Introduced by Senators Mike Crapo (R-ID), Ron Wyden (D-OR), Jim Risch (R-ID), and Jeanne Shaheen (D-NH), this bipartisan legislation complements the House version (H.R.33), which overwhelmingly passed the House by a 423–1 vote in January 2025.

Addressing double taxation burdens is the vital next step to complement these tariff reductions. By reducing key withholding taxes and providing targeted wage relief for qualified residents of Taiwan, this legislation will provide the legal and financial certainty necessary to sustain long-term U.S.-Taiwan strategic economic cooperation and investment.

Sources:
[1] Federal Register   [2] Formosan Association for Public Affairs (FAPA)   [3] Taipei Times   [4] Taipei Times   [5] Office of the U.S. Trade Representative (USTR)   [6] FAPA   [7] S.199 / H.R.33 (U.S.-Taiwan Expedited Double-Tax Relief Act)   [8] Office of Sen. Mike Crapo

---

Bipartisan “Blue Skies for Taiwan Act” Introduced in U.S. House to Bolster Secure U.S.-Taiwan Drone Cooperation

On May 26, 2026, Representative Eugene Vindman (D-VA) introduced the Blue Skies for Taiwan Act (H.R.9042) in the U.S. House, with Representatives Michael Lawler (R-NY) and Madeleine Dean (D-PA) joining as original cosponsors.
 
The Senate companion (S.4259) was previously introduced on March 26, 2026, by Senators Jeff Merkley (D-OR), Ted Cruz (R-TX), and John Curtis (R-UT), with Senator Andy Kim (D-NJ) joining as a cosponsor.
 
Why It Matters
 
This crucial bipartisan legislation aims to expand U.S.-Taiwan technical, industrial, and supply-chain cooperation on unmanned aerial systems (UAS) as Taiwan faces intensifying pressure from the People’s Republic of China (PRC) and Beijing’s continued dominance of the global UAS supply chain.
 
By creating a fast-track certification process for trusted Taiwanese drone and component manufacturers, the bill helps build a robust “Blue UAS” ecosystem that is secure, resilient, and independent of China-linked technology and components. This initiative directly enhances American national security while bolstering Taiwan’s defense readiness and resilience.
 
Strategic Implications
 
This legislation marks a significant evolution in U.S.-Taiwan relations by moving beyond traditional, one-way arms sales toward a more reciprocal defense-industrial partnership. By integrating Taiwan into the Pentagon’s Blue UAS framework, the United States is recognizing Taiwan’s technological and manufacturing strengths as indispensable assets for addressing critical gaps in allied drone production.

At a time when Taiwan’s domestic drone industry is rapidly expanding yet faces complex uncertainties in its own domestic defense funding, this legislation sends a powerful strategic signal. It establishes that the United States has a clear, vested interest in helping Taiwan scale secure, PRC-free drone production as part of a broader Indo-Pacific deterrence architecture.
 
Sources:
[1] H.R.9042 / S.4259 (Blue Skies for Taiwan Act)   [2] Office of Sen. Jeff Merkley   [3] Formosan Association for Public Affairs (FAPA)   [4] FAPA