Secretary of State Mike Pompeo ended the policy that restricted official US government visits to Taiwan. It came just over a week before President Donald Trump is set to leave the White House.
Mr Pompeo accused the nearly four-decade long policy of being “an attempt to appease the Communist regime in Beijing”.
In a statement issued on Saturday, Mr Pompeo said: “Taiwan is a vibrant democracy and reliable partner of the United States, and yet for several decades the State Department has created complex internal restrictions to regulate our diplomats, servicemembers, and other officials’ interactions with their Taiwanese counterparts.”
Mr Pompeo also tweeted that he lifted “all self-imposed restrictions on executive branch agencies’ interactions with their counterparts from Taiwan”.
He claimed the action would benefit both the US and Taiwan.
Although Taiwan thanked the US, China quickly condemned the move in a brutal warning.
Beijing has claimed sovereignty over the whole of Taiwan, a democracy of around 24 million people.
The two nations have been governed separately for over seven decades.
On Monday, China’s Foreign Ministry spokesman Zhao Lijian told reporters that Beijing is urging the US to “abide by the one-China principle”.
In a tweet Mr Wu said he was “grateful” to Mr Pompeo and that Taiwan will “continue in the months and years ahead to ensure Taiwan is and continues to be a force for good in the world”.
He added: “The closer partnership between Taiwan & the US is firmly based on our shared values, common interests & unshakeable belief in freedom & democracy.”
It comes after Mr Pompeo announced that US Ambassador to the UN will visit Taiwan in a move which infuriated China.
Mr Pompeo confirmed on Thursday that Kelly Craft will be sent to the island and will be the third senior US official to visit Taiwan since August.
In a statement last week, the US Secretary of State added: “Taiwan shows what a free China could achieve.”
Ms Craft is expected to land in Taiwan on Wednesday and will be the first US Ambassador to the UN to visit the island since it was formally excluded from the UN in 1971.
Beijing has continued to block Taiwan from becoming a member of the United Nations, claiming it is part of China.
President-elect Joe Biden will be inaugurated next week leaving many experts wondering how he will handle China during his time in office.
Sun Zhe, Director of the Center for U.S.-China Relations at Tsinghua University told CBS News he was “not sure what Biden will do, but he has been careful in handling the Taiwan issue” in the past.
Mr Sun added that “Biden was cautious, and I think he will be more prudent.”