The deal would reduce the U.S. tariff rate to 15 percent for goods imported from Taiwan, the sources said. This rate aligns with those applied to imports from Japan and South Korea, Asian allies that finalized similar agreements last year. In return, TSMC would commit to constructing at least five additional semiconductor fabrication plants, or fabs, in Arizona, effectively doubling its existing footprint in the state, one source 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 negotiations to lower these rates in exchange for investment commitments and agreements that advance U.S. national security objectives. South Korea, for example, agreed to increase its purchases of U.S. goods and services as part of its trade deal.

The proposed trade agreement highlights the strategic importance of semiconductors, the essential components that power everything from smartphones to advanced weapons systems. Securing domestic semiconductor manufacturing capacity has become a priority for the U.S. government, driven by concerns over supply chain vulnerabilities and geopolitical competition. The CHIPS and Science Act, signed into law last year, provides billions of dollars in incentives to encourage semiconductor companies to build facilities in the United States.

TSMC's potential expansion in Arizona reflects this broader trend. The company is already constructing a $12 billion fab in the state, and the additional fabs would significantly increase U.S. semiconductor production capacity. This would reduce reliance on foreign sources, particularly those located in regions with geopolitical risks.

The use of artificial intelligence (AI) is increasingly prevalent in semiconductor manufacturing. AI algorithms are used for process optimization, predictive maintenance, and quality control, enhancing efficiency and reducing defects. The new TSMC fabs in Arizona are expected to incorporate advanced AI-driven manufacturing techniques. The implications of this technology extend beyond economic considerations, impacting national security and technological leadership.

The agreement's potential impact on society is multifaceted. Increased domestic semiconductor production could create high-paying jobs and stimulate economic growth. It could also enhance U.S. competitiveness in key technological sectors. However, the environmental impact of semiconductor manufacturing, including water and energy consumption, must also be considered.

The legal scrubbing of the agreement is expected to be completed soon, paving the way for a potential announcement this month. The details of the agreement, including the specific incentives offered to TSMC and the precise timeline for the investments, will likely be revealed at that time. The agreement is subject to change.