U.S.-Taiwan Trade and Economic Relations

Updated March 26, 2026

U.S.-Taiwan Trade and Economic Relations

Taiwan is a top U.S. trade partner and a key link in global

technology supply chains. Taiwan’s economy is highly

dependent on global trade; exports account for about 70%

of its gross domestic product (GDP). Taiwan’s policies are

seeking to generate growth in emerging technologies and

reduce dependence on the People’s Republic of China (PRC

or China) by diversifying trade and investment. Central to

these efforts are U.S. and Taiwan government actions to

deepen commercial ties. Issues before Congress include the

January 2026 U.S.-Taiwan tariff and investment deals, and

bills aiming to prevent double taxation and promote U.S.

liquefied natural gas (LNG) exports to Taiwan. See CRS In

Focus IF10275, Taiwan: Background and U.S. Relations;

CRS In Focus IF12481, Taiwan: Defense and Military

Issues; and CRS Infographic IG10073, Taiwan’s Role in

Global Semiconductor Supply Chains.

tax havens.) Taiwan is a top holder of foreign exchange

reserves, with $604.5 billion in reserves as of January 2026.

Taiwan is the 10th-largest foreign holder of U.S. Treasuries

with $310.6 billion in holdings as of December 2025.

Taiwan’s Economy

Population: 23.4 million people.

2025 nominal GDP: $884.4 billion (1.5% agriculture, 39.8%

industry, 58.7% services); 22nd largest global economy.

Taiwan’s economy grew by 3.7% in 2025 due mostly to strong

global demand for chips and electronics.

Unemployment Rate: 3.4% (11.6% ages 20-24; 5.9% ages

25-29).

Main industries: Electronics, semiconductors, information

technology, petrochemicals, textiles, steel, machinery, cement,

food, autos, and pharmaceuticals.

Semiconductors: About 90% of global advanced chips are

made in Taiwan. Taiwan firms are also active in design; R&D;

materials; and assembly, packaging, and testing.

Energy Mix (consumption): Oil and gas (47%); coal (31%);

renewables (13%); and nuclear (5%). Taiwan relies on imports

for almost 98% of its energy needs. Taiwan’s government in

early 2026 signaled its intention to re-invest in nuclear power

after taking steps to phase it out.

Competitiveness: Switzerland’s International Institute for

Management Development Business School ranks Taiwan as

the world’s sixth most competitive economy. Taiwan is coping

with stagnant wages; technical talent gaps; an aging population;

and land, power, and water shortages. The Taiwan

government’s “5+2” plan is boosting targeted industries—

advanced manufacturing, biotechnology, renewable energy,

recycling, and defense.

U.S.-Taiwan Commercial Ties

Taiwan is the United States’ 5th-largest merchandise trading

partner ($256.1 billion in total goods trade), 9th-largest

export market ($54.7 billion), and 5th-largest source of

imports ($201.4 billion), according to 2025 U.S. data (and

when the European Union is considered as one trading

partner). The U.S. trade deficit with Taiwan reached $146.7

billion in 2025. U.S. agricultural exports to Taiwan in 2025

were $4.3 billion. In 2024, U.S. services exports to Taiwan

were $13.7 billion, and Taiwan’s services exports to the

United States were $13.2 billion.

Taiwan’s exports to the United States have been growing as

firms have shifted some production and finished goods

exports away from the PRC and with strong U.S. demand

for semiconductors and electronics. Between 2018 and

2025, Taiwan’s goods exports to the United States grew by

341% while U.S. exports to Taiwan grew by 75%. In 2025,

Taiwan’s U.S. exports rose by 73% while U.S. exports to

Taiwan rose by 29% over 2024 levels. (Figure 1.)

Figure 1. U.S.–Taiwan Goods Trade 2001-2025

Source: CRS, with data from the U.S. Bureau of Economic Analysis

(BEA) and Taiwan’s Ministry of Economic Affairs.

Notes: In 2025, Taiwan firms received $268.3 billion in U.S. export

orders globally, which includes Taiwan firms’ PRC-based production.

In 2024, U.S. direct investment stock in Taiwan was $20.1

billion, and Taiwan’s direct investment stock in the United

States was $14.8 billion, according to BEA. (Data do not

include investments made through Hong Kong and offshore

Efforts to Strengthen Economic Ties

The United States and Taiwan have undertaken several

efforts to address market barriers and bolster economic ties:

• In 2026, Taiwan joined as a non-signatory the U.S.-led

Pax Silica effort on secure technology supply chains.

In 2022, the United States and Taiwan launched a “U.S.Taiwan Initiative on 21st Century Trade,” parallel to the

U.S.-led Indo-Pacific Economic Framework for Prosperity,

which does not include Taiwan. The initiative covers trade

facilitation, technical standards, regulatory and nonmarket

practices, and other issues. The two sides reached their first

agreement in 2023. P.L. 118-13 asserts Congress’ ex-post

approval of the agreement, sets conditions for its entry into

force, and requires consultation for future agreements.

•

In 2021, the United States and Taiwan resumed talks,

last held in 2016, under a 1994 Trade and Investment

Framework Agreement (TIFA). Taiwan’s barriers in

agriculture led the U.S. government to suspend TIFA

talks between 2007 and 2013. Other U.S. concerns

about Taiwan’s market barriers include those in digital

services, biotech, medical devices, and energy.

https://crsreports.congress.gov

U.S.-Taiwan Trade and Economic Relations

•

In 2020, the two sides launched a U.S.-Taiwan

Economic Prosperity Partnership Dialogue, which

meets annually to discuss supply chains; PRC coercion;

digital trade; research; energy; and tax issues. In 2024,

the U.S. International Development Finance Corp. said

it would invest with Taiwan in some overseas projects.

Since 2020, the Treasury Department has listed Taiwan in

its currency monitoring report for macroeconomic

policies and currency practices of concern, citing Taiwan’s

large trade account surplus and foreign exchange reserves.

Taiwan operates a managed floating exchange regime and

intervenes to maintain “stability.”

U.S. policy encourages Taiwan’s membership in global

economic organizations for which statehood is not required.

Taiwan is a member of the World Trade Organization, the

Asian Development Bank, and the Asia-Pacific Economic

Cooperation forum, which refer to it as an economy or a

separate customs territory, not a state.

Cross-Strait Economic Ties

The PRC (including Hong Kong) is Taiwan’s largest investment

and trading partner with $263.7 billion in trade in 2025.

Taiwan data shows that Taiwan’s goods exports to the PRC as

a share of Taiwan’s total exports were 23% in 2025, down

from 42.3% in 2021. An estimated 177,000 Taiwan citizens

worked in the PRC in 2022, down from 242,000 in 2020.

Since 2017, Taiwan authorities have sought to diversify away

from the PRC and address the risks of PRC investment in

Taiwan’s infrastructure (e.g., shipping, finance, and media).

This follows the 2008-2016 period when the government of

Taiwan, then led by the Kuomintang party, negotiated direct

trade, transportation, and postal links and a 2010 economic

cooperation deal with the PRC. Beijing has used economic

coercive actions to pressure Taiwan’s Democratic Progressive

Party, which has led the government since 2017, over its

opposition to the PRC’s “one country, two systems”

framework for cross-Strait relations. During Taiwan’s 2024

elections, the PRC opened a review of Taiwan’s “trade

barriers” and revoked tariff preferences for 12 petrochemical

items. The PRC also uses incentives to attract Taiwan

investment and immigration and pressure Taiwan officials and

firms to constrain Taiwan’s diversification efforts. Since 2023,

the PRC has promoted economic integration of its Fujian

province with Taiwan.

Taiwan authorities’ efforts to curtail industry’s role in the

PRC’s semiconductor sector have had limited success. Taiwan

engineers and firms have partnered with the PRC government

to develop PRC capabilities. The PRC has used firms in

Taiwan to make chips, recruit engineers, and steal technology.

In 2022, Taiwan amended its National Security Act to

criminalize economic espionage and require approval to use

trade secrets and critical technologies outside of Taiwan.

Issues Facing Congress

Tax. Congress has sought to address the complexities posed

by the unofficial status of U.S. relations with Taiwan as it

seeks to deepen economic ties. In 2025, H.R. 33 passed the

House (423-1). H.R. 33/S. 199 includes the U.S.-Taiwan

Expedited Double-Tax Relief Act and the U.S.-Taiwan Tax

Agreement Authorization Act. It aims to avoid double

taxation and encourage Taiwan investment in the United

States. It would amend the Internal Revenue Code of 1986

by providing special rules for the taxation of certain Taiwan

residents with income from sources in the United States. It

would authorize the President to negotiate a tax agreement

with Taiwan and require a Senate vote on an agreement.

U.S. Tariffs and Investment. In January 2026, the United

States and Taiwan reached a deal for a 15% U.S. tariff rate

on Taiwan, reducing a 32% tariff that President Trump

imposed in 2025 under the International Emergency

Economic Powers Act (IEEPA, 50 U.S.C. §§1701 et seq).

The 2025 action and the 2026 deal both except electronics,

semiconductors, and goods subject to Section 232 actions.

In February 2026, the Supreme Court ruled against the use

of IEEPA to impose tariffs. In response, President Trump

imposed a 10% global tariff for 150 days under Section 122

of the Trade Act of 1974 (19 U.S.C. § 2132) and the U.S.

Trade Representative initiated an investigation under

Section 301 of the Trade Act of 1974 (19 U.S.C. §2411) of

structural excess capacity manufacturing in Taiwan and 15

other foreign markets. Taiwan officials have said that,

despite U.S. tariff policy changes, they would like to keep

the deal. Some experts say it may be hard for the deal to

pass Taiwan’s opposition-controlled legislature. The deal

exempts generic drugs, aircraft parts, and certain natural

resources from the 15% tariff, and caps at 15% Section 232

tariffs on auto parts, timber, lumber, and wood derivative

products. It creates duty-free and lower-tariff-rate quotas on

semiconductor imports for firms investing in U.S. capacity.

Taiwan is to purchase from the United States between 2025

to 2029: $44.4 billion in LNG and crude oil; $25.2 billion

in equipment; and $15.2 billion in civil aircraft. Taiwan

also is to invest $250 billion in the U.S. semiconductor

sector; provide $250 billion in credit guarantees for other

U.S. investment; and establish U.S. industrial parks. Since

2020, Taiwan Semiconductor Manufacturing Company Ltd.

(TSMC) has invested in three fabrication plants in Arizona.

In 2025, it committed to invest an additional $100 billion.

Free Trade Agreement (FTA). A U.S.-Taiwan FTA could

boost two-way trade and investment and encourage other

countries to pursue similar deals. Taiwan has FTAs with

New Zealand and Singapore and an investment deal with

Canada. Its efforts to seek trade deals with Australia, Japan,

the European Union, and the United Kingdom led the PRC

to exert pressure on those countries. The PRC imposed an

embargo on Lithuania for enhancing Taiwan ties. In 2021,

Taiwan and the PRC applied to join the Comprehensive and

Progressive Agreement for Trans-Pacific Partnership; the

PRC has pressed countries not to admit Taiwan.

Energy. Taiwan’s reliance on energy imports and limited

stockpiling capacity may leave it vulnerable to supply

disruptions, such as a PRC blockade. S. 2722 would

promote U.S. LNG exports to Taiwan and the development

of LNG storage in Taiwan.

Export Controls. U.S. export control actions since 2020

restrict any firm that uses U.S. technology from making

certain chips for some PRC firms. Many PRC firms are not

restricted, however, and some have reportedly used proxies

to work around controls and make chips at TSMC: In 2021,

Pythium procured chips for China’s hypersonic missile

program; in 2024, Huawei procured its 910 Ascend chips.

Karen M. Sutter, Specialist in Asian Trade and Finance

https://crsreports.congress.gov

IF10256

U.S.-Taiwan Trade and Economic Relations

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https://crsreports.congress.gov | IF10256 · VERSION 36 · UPDATED