Agreement on Reciprocal Trade to Cut Tariffs on US Goods

The key distinction: this agreement changes customs duties (tariffs) at the border, not your U.S. income tax rate—but tariffs can still change your taxable income through inventory and cost accounting

For tax year 2026 (returns filed in 2027), the new Agreement on Reciprocal Trade between the United States and Taiwan is best read as a “landed-cost agreement.” It reshapes what importers pay in tariffs (a form of import tax collected at entry) and what exporters can expect from Taiwan’s tariff reductions.

That matters for U.S. taxpayers because tariffs often flow into cost of goods sold (COGS) or inventory capitalization. That can change taxable business income, even though the tariff is not an “income tax.”

This article compares what the agreement does on each side, and how immigrants, visa holders, and cross-border founders should translate it into 2026 accounting, contracts, and compliance.

Current as of February 13, 2026.

1) Overview of the Agreement on Reciprocal Trade

The Agreement on Reciprocal Trade was finalized on February 12, 2026 under the AIT/TECRO framework. The signing was overseen by U.S. Trade Representative Ambassador Jamieson Greer. It was attended by Taiwan’s Vice Premier Li-chiun Cheng and Minister without Portfolio Jen-ni Yang.

In practice, those names matter because they signal the agreement is being treated as an implementation-ready trade package. It is not just a broad statement of intent.

What “tariff barriers” and “reciprocal tariffs” mean in plain English

• Tariff barriers are import duties that raise the landed cost of goods. Landed cost includes product price, freight, insurance, and duties.
• Reciprocal tariffs are tariffs set in response to another country’s market access rules. They can be higher than a country’s normal tariff schedule.

For a U.S. importer, a “reciprocal tariff” can change the duty rate used at customs entry. That can change your unit economics and pricing, even if your income tax bracket stays the same.

2) Tariff provisions and market access (the mechanics that hit your landed cost)

This is the part most likely to change near-term cash flow for businesses that move goods between the U.S. and Taiwan.

Side-by-side comparison: what changes, who feels it, and what to check

Sector examples (how “market access” shows up in real shipments)

The agreement highlights tariff reductions across many industrial and agricultural areas. Examples include autos and parts, chemicals, seafood, machinery, health products, electrical products, metals and minerals, horticulture, grains, and meats. It also points to processed foods.

For exporters of US goods into Taiwan, the practical question is not “Is there an agreement?” It is “Does my exact classification and origin qualify under the schedule?”

For U.S. importers buying from Taiwan, the key question is whether the line is subject to MFN or the 15% reciprocal approach, and whether an exclusion applies.

Why MFN vs reciprocal rate matters for tax and contracts

• **Cash paid at entry**
• **Per-unit cost**, which often drives resale price
• **Inventory valuation** and COGS timing
• **Incoterms** (DDP vs. DAP vs. FOB) and who bears duty cost

If you quote a customer using duty-paid assumptions (often similar to DDP economics), a surprise change in duty can erase margin.

⚠️ Warning: A common mistake is treating tariffs like a “below-the-line” expense. For many product businesses, duties are part of inventory cost and may not reduce taxable income immediately.

The U.S. income tax angle: when tariffs reduce taxable income (and when they do not)

For U.S. federal income tax, tariffs generally become part of your business costs. The timing depends on your facts.

• **Resellers with inventory**: duties are often included in inventory costs and recovered through **COGS** when the goods sell. Many businesses must capitalize certain costs under **IRC §263A** (the uniform capitalization rules).
• **Small sellers without inventory**: duties may be deductible as a business expense if not required to be capitalized, depending on your accounting method and facts.
• **Personal imports**: if you import for personal use, duties are generally not deductible.

For where to start on accounting methods and who is a resident vs nonresident for U.S. tax, see IRS **Publication 519 (U.S. Tax Guide for Aliens)** at **irs.gov/pub/irs-pdf/p519.pdf** and the IRS international portal at **irs.gov/individuals/international-taxpayers**.

Example with numbers (COGS vs immediate deduction)

Assume in 2026 your single-member LLC imports goods from Taiwan.

• Purchase price: **$100,000**
• Ocean freight and insurance: **$8,000**
• Tariff at entry under reciprocal approach: **15%** of customs value (simplified) → **$15,000**
• Total landed cost: **$123,000**

If the goods are inventory, that **$15,000** usually becomes part of inventory cost. You recover it through COGS as units sell. That timing can change your 2026 taxable income versus 2027.

3) Purchase commitments (2025–2029): not a tariff cut, but a demand signal

The agreement also includes multi-year purchase commitments by Taiwan from 2025–2029 in three headline buckets:

• **$44.4 billion** in liquefied natural gas and crude oil
• **$25.2 billion** in power and grid equipment and industrial materials
• **$15.2 billion** in civil aircraft, engines, and related equipment

Tax-wise, purchase commitments do not directly change your tax rate. They can change revenue forecasts, inventory planning, and financing needs.

The nuance is important. A commitment is not the same as a guaranteed purchase order. Commercial terms still govern:

• tendering and procurement rules
• regulatory approvals
• delivery schedules and shipping capacity
• financing and credit decisions

If you expand capacity based on projected demand, align your tax accounting early. Choices like inventory method and depreciation affect 2026–2029 reporting.

4) Additional commitments: export controls, diversion risk, and supply-chain checks

A major compliance theme in the agreement is Taiwan’s commitment to strengthen export controls. The stated goal is preventing diversion of advanced semiconductors, equipment, machine tools, computing items, and critical technologies to covered nations, including **China**.

In business terms:

• **Diversion** means the goods end up with a different end user or destination than stated.
• **End-use/end-user controls** require screening and documentation. Red flags can include unusual routing, inconsistent customer profiles, or requests to remove labels.

For high-tech firms, this is not only a trade compliance topic. It becomes a tax risk topic if a transaction is unwound, inventory is stranded, or contracts are terminated. It can also affect revenue recognition and reserves.

The agreement also points to resilience initiatives in semiconductors and AI. It cites a prior memorandum referencing up to **$500 billion** in U.S. investments and credit guarantees tied to AI and semiconductor manufacturing.

5) Implementation and legal procedures: when it becomes effective, and how to plan for the gap

The agreement’s entry-into-force trigger is simple in concept: it becomes effective **the day after both sides notify completion of domestic legal procedures**.

That “day after” phrasing matters because it can create an uncertainty window. Companies should expect:

• implementing instructions and customs guidance
• clarifications on product coverage and exclusions
• compliance checkpoints for documentation

Planning steps that reduce surprises:

• Write contract language that addresses duty-rate changes.
• Coordinate with your customs broker on classification and origin proof.
• Time inventory arrivals if the effective date may move.

📅 Deadline Alert: For tax year 2026, most individuals file Form 1040 by April 15, 2027. Many self-employed immigrants also need estimated taxes on April 15, June 15, September 15, 2026, and January 15, 2027 (dates can shift for weekends/holidays). Check current IRS deadlines at irs.gov/forms-pubs.

6) Implications for stakeholders (what to do with this information)

Farmers, ranchers, and fishermen

Lower tariff barriers in Taiwan may improve competitiveness for U.S. exports. The operational work is proving classification and origin, and aligning pricing with duty savings.

Manufacturers and SMB importers

If you import from Taiwan, model landed cost with both MFN and the 15% reciprocal rate. Then check whether an exclusion applies for your products.

Also align your bookkeeping so duties are captured correctly for tax:

• Make sure duty, freight, and broker fees are mapped consistently.
• Keep entry documents with your inventory records.

Logistics and warehousing teams

Higher duties can change cash needs at arrival. It can also change reorder cycles and safety stock if demand shifts.

High-tech and cross-border founders

Expect stronger screening and documentation expectations, especially where downstream routing could implicate China. Put end-use clauses in contracts and keep customer due diligence files.

For immigrants and visa holders running U.S. businesses, remember your U.S. tax status controls reporting scope. Resident aliens generally report worldwide income, while nonresident aliens generally report U.S.-source income, subject to treaty rules. The starting point is Publication 519 (linked above).

Common mistakes (and how to avoid them)

1. **Assuming “99% coverage” means your exact product is duty-free** Coverage is broad, but classification and schedule details decide outcomes.
2. **Quoting customers without a duty-change clause** Use contract language that addresses tariff changes, or price using conservative scenarios.
3. **Posting tariffs to the wrong place in the books** Many product businesses must treat tariffs as inventoriable costs. Misposting can distort COGS and taxable income.
4. **Skipping origin documentation** A tariff rate often turns on origin and exclusions. Keep supplier certifications and entry records.

You are “mostly an exporter” if… / “mostly an importer” if… / “mostly a tax-and-accounting stakeholder” if…

You are mostly an exporter if you sell US goods into Taiwan and your pricing depends on Taiwan duty reductions.

You are mostly an importer if you bring Taiwan-origin goods into the U.S. and your landed cost changes under MFN versus the 15% reciprocal approach.

You are mostly a tax-and-accounting stakeholder if tariffs materially change inventory costs, COGS timing, cash flow at entry, or your 2026 pricing and contracting.

Action items for 2026 planning:

• Rebuild landed-cost models using MFN versus reciprocal scenarios.
• Tighten HTS classification, origin support, and exclusion screening files.
• Review how duties flow into inventory and COGS before year-end close.
• Coordinate with a tax professional if you are a nonresident, dual-status filer, or have cross-border entities (see IRS Publication 519).

⚠️ Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax situations vary based on individual circumstances. Consult a qualified tax professional or CPA for guidance specific to your situation.