ETFs to Gain as US & Taiwan Sign Trade Deal to Reduce Tariffs to 15%

The landmark trade agreement signed between the United States and Taiwan on Feb. 12, 2026, has ignited a new wave of optimism for the island’s industrial powerhouses. By reducing reciprocal tariffs from 20% to 15%, the deal directly lowers the cost of entry for Taiwanese high-tech exports — particularly semiconductors, generic pharmaceuticals and aircraft parts — into the world’s largest economy.

This reduction effectively places Taiwan on a "fair footing" with other Asian allies like Japan and South Korea, removing the competitive disadvantage previously caused by "Trump-era" reciprocal duties. 

For investors, this pivotal deal creates a significant tailwind for Taiwanese giants like Taiwan Semiconductor TSM and, by extension, Exchange-Traded Funds (ETFs) that hold heavy concentrations of them, as these companies remain poised for margin expansion and increased shipment volumes in the days ahead.

By holding a diversified basket of these firms, ETFs offer a direct route to capitalize on this improved competitive landscape without the risk of picking individual stocks.

Before suggesting these ETFs for your portfolio, let us delve a little deeper into the specifics of this trade deal and the prospects for Taiwanese companies, so you can make a more informed investment decision.

US-Taiwan: The Evolving Geopolitics of a Strategic Partnership

The U.S.-Taiwan relationship is far from simple, operating within a complex geopolitical framework. 

As the United States steadily pushes for a “Silicon Shield” by reshoring 40% of the semiconductor supply chain to its shores, Taiwan leverages its dominance in AI hardware to secure more favorable trade terms. 

Against this backdrop, the agreement effectively codifies the mutual dependency between the two nations, with the United States lowering trade barriers in exchange for Taiwan deepening its critical technology investments in America.

The deal includes an $84 billion commitment from Taiwan to purchase U.S. goods — including LNG, crude oil and aircraft — between 2025 and 2029, along with a $250 billion investment pledge by Taiwanese firms into U.S. manufacturing. Taiwan has also pledged to remove or reduce 99% of tariff barriers on U.S. goods, as well as provide “preferential market access” for U.S. exports, including autos, beef products and minerals (as per a CNBC press release). 

This "reciprocal trade" framework, while aimed at narrowing the U.S. trade deficit, will add impetus to the booming Taiwanese economy by fueling the insatiable global demand for AI.

ETFs to Gain

Bolstered by this deal, Taiwan’s economy, which grew 8.6% in 2025, is expected to maintain its momentum despite global "AI bubble" fears. According to Fortune, this growth was largely fueled by a 78% surge in exports to the United States, backed by ballooning AI demand.

Now that the tariff is reduced, more export volumes are expected to be registered this year, which should help Taiwanese "enablers" capture efficiency gains in the coming days. 

Against this backdrop, for those looking to capitalize on this transformation, the following ETFs offer the most direct exposure:

iShares MSCI Taiwan ETF EWT

This fund, with net assets worth $8.15 billion, offers exposure to 88 large and mid-sized companies in Taiwan. Its top three holdings include TSM (24.66%), Mediatek (4.72%) and Hon Hai Precision Industry HNHPF (4.56%). 

EWT has surged 37.5% over the past year. The fund charges 59 basis points (bps) as fees. It traded at a good volume of 6.98 million shares in the last trading session. 

Franklin FTSE Taiwan ETF FLTW

This fund, with net assets worth $706.3 million, offers exposure to 130 Taiwan large and mid-capitalization stocks. Its top three holdings include TSM (22.09%), HNHPF (6.35%) and Mediatek (6.25%). 

FLTW has soared 46.2% over the past year. The fund charges 19 bps as fees. It traded at a volume of 0.49 million shares in the last trading session. 

Fidelity Emerging Markets Multifactor ETF FDEM

This fund, with net assets worth $448.1 million, offers exposure to 250 stocks of large and mid-capitalization emerging markets companies that have attractive valuations, high quality profiles, positive momentum signals, lower volatility than the broader emerging markets equity market, and lower correlation to the U.S. equity market. TSM holds the first position in this fund, with 10.30% weightage.  

FDEM has gained 30.6% over the past year. The fund charges 28 bps as fees. It traded at a volume of 0.20 million shares in the last trading session.   

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This article originally published on Zacks Investment Research (zacks.com).

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