The deal would reduce the U.S. tariff rate on goods from Taiwan to 15 percent, the sources said. This rate aligns with the tariff levels applied to imports from Japan and South Korea, both Asian allies that reached similar agreements with the U.S. last year.

A key component of the agreement involves TSMC committing to build at least five additional semiconductor fabrication facilities, or fabs, in Arizona, effectively doubling its existing footprint in the state, one of the sources indicated. The specific timeline for these investments remains unclear. A TSMC spokesman declined to comment on the matter.

Since initiating tariffs on numerous trading partners in April, the Trump administration has pursued a strategy of reducing these rates in exchange for investment pledges and deals that advance U.S. national security objectives. South Korea, for example, entered into a similar agreement.

This potential trade deal highlights the increasing importance of semiconductors, often referred to as chips, in the global economy and national security. Semiconductors are the fundamental building blocks of modern electronics, powering everything from smartphones and computers to automobiles and advanced weapons systems. The concentration of semiconductor manufacturing in Asia, particularly in Taiwan, has raised concerns in the U.S. about supply chain vulnerabilities and potential national security risks.

TSMC, as the world's largest contract chipmaker, plays a pivotal role in the global semiconductor industry. Its advanced manufacturing capabilities are essential for producing the most sophisticated chips used in artificial intelligence (AI), high-performance computing, and other cutting-edge technologies. The company's expansion in the U.S. could help to bolster domestic semiconductor production and reduce reliance on foreign sources.

The construction of new semiconductor fabs in the U.S. also has significant implications for AI development. AI algorithms require massive amounts of computing power, which is enabled by advanced chips. By increasing domestic chip production, the U.S. can strengthen its position in the global AI race and ensure access to the critical hardware needed to develop and deploy AI technologies.

The implications of this deal extend beyond economics and national security. Increased domestic semiconductor production could create high-paying jobs and stimulate economic growth in the U.S. Furthermore, it could foster innovation in related fields, such as AI, robotics, and advanced manufacturing.

The agreement is subject to change and could still fall apart before being finalized. However, if completed, it would represent a significant step towards reshaping the U.S.-Taiwan trade relationship and strengthening the domestic semiconductor industry. The legal scrubbing process is expected to be completed soon, paving the way for a potential announcement later this month.