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Saturday, 17 October 2026dailybeirut.com
Economy
GlobalFoundries will build New York chip plants with Japanese funding under a trade deal linking tariff cuts to investment.
The United States is preparing to establish new semiconductor manufacturing facilities in New York state, financed primarily by Japan. This development represents the latest outcome of a commercial agreement between Washington and Tokyo that ties reduced tariffs on Japanese exports to substantial investments within the American economy.
GlobalFoundries announced last Wednesday its selection to operate two new chip factories in New York. Under this arrangement, Japan provides the capital while GlobalFoundries handles technology provision, construction management, and operational oversight. The Japanese Foreign Ministry stated that the first phase costs approximately $10 billion, with construction scheduled to begin before the end of 2026 and production starting in 2029. Potential expansion could raise total investments to $21 billion if additional production capacity is added.
This project falls under an accord finalized last year between the administration of President Donald Trump and Japan. Tokyo committed to providing up to $550 billion in investments and financing within the United States. In exchange, tariffs on Japanese automobiles and other imports were lowered to 15%, down from levels reaching 25%. According to the White House, the US administration selects which projects enter the investment package. Japanese funding includes equity contributions, loans, and loan guarantees channeled through government financial institutions.
Dr. Pierre Khoury, a university professor and writer specializing in corporate and technological economics, told "24" that the agreement reveals a shift in the function of US customs duties. He noted that tariffs are no longer limited to protecting local industry but have become a mechanism for securing foreign funding for American manufacturing in return for easing trade restrictions.
Khoury observed that Washington is moving away from the model of direct government incentives under the Chips Act toward a framework relying more heavily on foreign capital to build US factories. Reuters reported that American and Japanese entities will jointly own the new plants. While Japan supplies the venture capital, GlobalFoundries operates the facilities. In a separate agreement, the company disclosed that the US Department of Commerce acquired an additional stake of about 4% in its capital, raising the total US government share to roughly 7%.
According to Khoury, the United States achieves multiple benefits from this structure, including added manufacturing capacity, job opportunities, and ownership stakes, without bearing the cost of the Japanese capital allocated to the project. GlobalFoundries benefits by expanding its operational capacity without self-financing factory construction, while earning returns for management and technology services. The company projected revenues of nearly $50 million in 2027 from services linked to the project, with fees continuing for at least 20 years.
For Japan, the deal offers companies opportunities to supply chip manufacturing equipment, notably Tokyo Electron, and secures US production capacity for Renesas Electronics. The Japanese Foreign Ministry confirmed these expected benefits, citing interest among Japanese firms in supplying equipment and materials and purchasing produced chips. Khoury estimated that reducing US tariffs on Japanese cars and parts by ten percentage points could save over $5 billion annually, based on import values, though this remains a theoretical saving rather than realized profit.
However, Khoury pointed out that the distribution of returns raises questions regarding Tokyo’s investment gain. The general framework stipulates splitting cash flows equally until Japan recovers its calculated contribution, after which 90% goes to the United States and 10% to Japan. He argued that Japan targets not only investment returns but also the protection of its export capability to the US market, despite assuming financial risks. Japanese Trade Minister Ryosei Akazawa stated, according to Reuters, that projects undergo joint reviews to ensure financial viability, repayment potential, and benefits for Japanese companies.
Khoury concluded that this model may reshape the relationship between trade protection and manufacturing finance, as tariff reductions now depend on investment commitments borne by exporting nations.
