India is in talks with Taiwan over a deal regarding chip production. The new discussions would have both countries enter into a semiconductor manufacturing agreement, bringing a new chip plant to India.

According to a Bloomberg report, the talks are related to chip plant and new trade deal between both nations. However, this move might spark new frictions with China. As per sources close to the matter, the officials from New Delhi and Taipei have met in recent weeks to discuss a possible agreement that would bring a chip plant to India. This chip manufacturing site would have an estimated worth of 7.5 billion US Dollars and would supply the nation with various components related to 5G to even electric cars.

As of right now, India is also surveying potential locations that can provide this site with sufficient water, land, and manpower. Furthermore, the country also seeks to provide financial support of 50 percent of the capital expenditure from 2023. This would also includes other benefits like tax breaks and other incentives as well. Notably, the officials from Taipei also wanted fast progress on a bilateral investment agreement that would include lowered tariffs for various products that are used to make semiconductors.

Unfortunately, the Office of Trade Negotiations in Taiwan declined to comment on the matter while India’s trade ministry has yet to provide a comment regarding this matter. The report added that Taiwan has long sought a trade deal with India, however, official in New Delhi have been reluctant due to rise of new frictions with China caused by this move. For those unaware, China considers the island nation as its territory.

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UPDATE:

WSJ confirmed that the Phase One deal has been finalized! It covers Agriculture, Intellectual Property Protection, Tech Transfer, Financial Opening and Currency.

After several rounds of tariffs on Chinese and U.S. made products in their respective markets, China and the U.S. have finally come very close to a mini trade deal. This news should come as a relief to companies based in both the markets as it will reduce as well as eliminate the new set of tariffs expected to be imposed on goods from China starting December 15. 

The U.S. President Trump tweeted yesterday night that the U.S. was getting “VERY close to a BIG DEAL with China”. The exact details of the deal are not yet official, but the U.S. has reportedly agreed to scale back some of its existing tariffs on Chinese goods. The deal would also remove the next round of tariffs that would have hit another $150 billion worth of Chinese goods from December 15. In return, China will pledge in writing to purchase $50 billion worth of U.S. agricultural goods, among other items in 2020. 

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The upcoming round of U.S. tariffs on Chinese goods starting December 15 would have been damaging to both the countries. It included essential consumer goods such as smartphones, gaming consoles, computer monitors, and even clothing and footwear. On the same day, China would have imposed its own set of tariffs on American made goods such as automobiles, auto parts, corn, wheat, small aircrafts, among other items. 

While this Phase I trade pact is almost official from the U.S. side, we are yet to hear an official announcement from the Chinese authorities. We won’t have to wait too long though, as an official statement or an absence of one before December 15 would confirm the status of the deal.

Note that this phase one trade deal is unlikely to decide Huawei‘s fate who’s currently on the U.S. entity list. This deal is more focused on working out an amicable agreement before the next round on hefty tariffs that’ll come into effect this Sunday, which will be damaging for both the markets. 

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