Double Tax Relief Urgently Needed Following Historic U.S.-Taiwan Tariff Deal

On January 15, 2026, the Trump Administration finalized a historic trade deal with Taiwan, setting reciprocal tariffs at no more than 15%. The rate reflects a gradual reduction from the initial 32% announced in April 2025 and 20% in August, ultimately putting Taiwan on equal footing with other major U.S. partners like Japan and South Korea.
 
In return, Taiwan’s enterprises will make direct investments of at least US$250 billion to boost semiconductor, energy, and AI production and innovation capacity in the U.S. (including the US$100 billion already committed by Taiwanese chipmaker TSMC in 2025). This investment commitment by Taiwanese companies is further supported by the Taiwan government’s pledge to provide up to US$250 billion in credit guarantees.
 
The deal also caps Section 232 “national security” tariffs for Taiwanese auto parts at 15 percent, while eliminating reciprocal tariffs (0 percent) for aircraft components and generic pharmaceuticals. Furthermore, it grants most-favored treatment for Taiwanese semiconductors and related derivative products under Section 232, rewarding Taiwanese producers that invest in the U.S. with significant tariff exemptions.
 
Why It Matters
 
The deal will further shift production of some advanced semiconductors to the United States, ensuring that the chips powering American defense systems and AI remain insulated from the People’s Republic of China (PRC) economic coercion. While recognizing Taiwan’s manufacturing output as a critical contributor to American national security, the agreement will facilitate the establishment of world-class industrial parks in the U.S., positioning Taiwan as a crucial industrial partner in expanding the American advanced manufacturing base.
 
Despite this significant progress in the recent trade deal, a January 18 statement by the Formosan Association for Public Affairs (FAPA) warned that the absence of a U.S.-Taiwan double taxation agreement remains a critical structural challenge in the bilateral economic relationship, imposing unfair tax-related risks on Taiwanese investments in the United States.
 
Taiwan remains the only top–ten U.S. trading partner without a bilateral tax agreement. A recent Bloomberg report highlighted that Taiwanese firms face an effective tax rate as high as 51% on U.S. profits, at least 10 percentage points higher than those of competitors from South Korea or Australia. The absence of a double-taxation agreement not only erodes the competitiveness of Taiwanese businesses in the U.S. but also leaves U.S. companies investing in Taiwan facing double taxation risks and regulatory uncertainty.
 
Congressional Attention
 
Congress should work to resolve these taxation challenges. Rep. Jason Smith (R-MO), who chairs the House Ways and Means Committee, presided over the passage of the United States-Taiwan Expedited Double-Tax Relief Act (H.R. 33). This legislation aims to modify the Internal Revenue Code to provide Taiwanese residents and businesses with tax benefits similar to those found in standard U.S. tax treaties; the bill passed the House with a near-unanimous 423–1 vote on January 15, 2025.
 
The focus now shifts to the Senate, where S. 199, sponsored by Sen. Mike Crapo (R-ID), must be fast-tracked to remove the double taxation barriers that currently penalize the small and medium-sized Taiwanese suppliers necessary for the Arizona “megafab cluster.”
 
Implications
 
FAPA National President Dr. Su-Mei Kao stated: “If the U.S.-Taiwan Expedited Double-Tax Relief Act is passed by Congress and enacted into law, it will create a multiplier effect alongside the success of the recent tariff negotiations, significantly reducing the tax burden on Taiwanese enterprises and employees in the United States. We urge the Senate to capitalize on this strong momentum and pass the bill without delay.”
 
Beyond serving as a reliable trade partner, Taiwan is demonstrating its role as an increasingly important strategic economic partner in bolstering the United States’ advanced manufacturing capabilities. Consequently, a military conflict in the Taiwan Strait or a Chinese invasion of Taiwan is no longer merely a foreign policy concern, but has become a direct threat to U.S. industrial operations and economic stability.
 
Sources:

[1] The Guardian   [2] Department of Commerce   [3] Taipei Times   [4] Focus Taiwan   [5] FAPA   [6] Reuters   [7] Bloomberg   [8] H.R. 33   [9] S. 199   [10] Focus Taiwan