Taiwan has announced a 20% “temporary” tariff as it nears the final stage of trade talks with the US. Once a formal agreement is in place, this tariff rate is likely to decrease. This new interim tariff is lower than the previous one and is significantly less than tariffs imposed on other major trading partners currently negotiating. Taiwan’s progress indicates that a deal with the US may be reached soon.

Significance Of Market Developments

The news that US-Taiwan trade talks are nearing completion is important for the market. It lowers the risk of a full-blown trade war, which has created a lot of uncertainty. We see this as a sign to prepare for a possible rally in assets linked to Taiwan’s economy. The Taiwan Stock Exchange Weighted Index (TAIEX), which has been nervously trading below its June 2025 high of 24,150, now has a reason to break out. With two-way trade between the US and Taiwan nearing $200 billion annually, and semiconductors being the main export, we expect bullish strategies. Call options on major tech exporters like TSMC should do well as tariff risks fade. We expect the New Taiwan Dollar (TWD) to strengthen against the US dollar. After the currency fell to 32.5 per dollar last month due to negotiation tensions, a return to earlier stronger levels near 31.0 is now likely. Traders should explore strategies that benefit from a weakening USD/TWD exchange rate. Implied volatility for Taiwanese stocks is likely to drop significantly in the coming weeks. The removal of tariff concerns makes sharp downturns less likely, which reduces volatility pricing. This environment is ideal for selling put options or creating bullish call spreads on ETFs that track the Taiwanese market.

Impact On US Technology Firms

This situation is similar to the USMCA trade agreement finalized in 2019, which cleared a major uncertainty from the North American market. After that deal, the Mexican Peso and related stocks rallied as uncertainty faded. We expect a comparable positive reaction for Taiwanese assets once this agreement is officially signed. This is also good news for major US tech firms that heavily rely on the Taiwanese supply chain. Companies like Apple and NVIDIA can expect more stable costs for components, which should positively impact their stock prices. A lower need for currency and supply chain hedging will benefit their profits. Create your live VT Markets account and start trading now. Create your live VT Markets account and start trading now.

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