Economic momentum to slow in second half: Academia Sinica's prediction
In 2021, Taiwan's economy faced challenges due to concerns over the potential impact of US tariffs and a rapidly appreciating New Taiwan dollar. The full-year growth forecast for Taiwan's economy has been revised down to 2.93 percent, as a result.
### US Tariffs and Their Economic Impact
In April 2025, the US announced a 32% reciprocal tariff on Taiwanese goods, excluding semiconductor products, as part of a broader strategic stance against Taiwan's dominance in the semiconductor industry and defense spending concerns. These tariffs created significant uncertainty, resulting in reduced investment and hiring, and contributed to a contraction in Taiwan’s export-dependent manufacturing sector.
If fully implemented, these tariffs were expected to cause up to a 5% drop in Taiwan’s manufacturing production value. The Taiwanese government responded with an NT$88 billion economic stabilization plan, emphasizing collaboration to mitigate the tariffs’ impact.
### New Taiwan Dollar Appreciation and Growth Challenges
The appreciation of the New Taiwan dollar against the US dollar added additional pressure on Taiwan’s export competitiveness in 2021. Exchange rate pressures, combined with tariff uncertainties, led to a downward revision of Taiwan’s 2025 GDP growth forecast to 2.93 percent. Authorities kept cautious policies to manage the NTD appreciation, wary of its negative impact on export earnings and overall economic growth.
### Trade Dynamics and Strategic Responses
The Taiwanese manufacturing sector, heavily reliant on exports, especially tech and semiconductors, faced challenges from shifting supply chains as major players like TSMC and Foxconn considered relocating portions of production to Southeast Asia or the US to circumvent tariffs and geopolitical risks. Taiwan’s exclusion from major regional trade agreements like RCEP and CPTPP limits its trade diversification options, increasing its vulnerability to US tariff policies and supply chain realignments.
Despite these challenges, Taiwan's semiconductor industry, particularly TSMC, remains a critical economic pillar, continuing large investments and serving as a "silicon shield" that supports Taiwan’s economic resilience and geopolitical leverage.
### Summary
The imposition of significant US tariffs in 2025, even though excluding semiconductors, created a climate of uncertainty that reduced manufacturing output and export growth. Concurrent appreciation of the New Taiwan dollar further strained Taiwan's trade competitiveness, affecting GDP growth prospects.
Government measures and industry adjustments have aimed to stabilize and adapt Taiwan’s economic and trade dynamics amid these pressures. Inflation in Taiwan is expected to ease to 1.85 percent. The strong export demand in the first half of the year was partly due to front-loaded orders ahead of possible US tariff hikes.
While direct data from 2021 on tariffs and exchange rate effects is limited, the 2025 context reflects continuing trends from that period, showing how tariff policy and currency valuation critically influence Taiwan's trade-driven economy. Policymakers and industries should reassess their strategies to navigate the new macroeconomic environment as Taiwan adapts to shifting trade dynamics and a potentially long-term appreciation trend in the NT dollar.
In the context of Taiwan's economy, the 2025 US tariffs on Taiwanese goods, aside from semiconductors, created uncertainties that heavily affected the business sector, specifically the manufacturing industry, resulting in reduced production values and export growth. In response to the tariffs and a rapidly appreciating New Taiwan dollar, the government implemented an NT$88 billion economic stabilization plan, focusing on collaboration to mitigate the impacts on finance and business.
As the New Taiwan dollar continued to appreciate against the US dollar, it placed additional pressure on Taiwan's export competitiveness, affecting its business sector and growth prospects. The government's cautious policies aimed to manage this appreciate, wary of its negative impact on export earnings and overall economic growth, showing the interconnectedness of finance and business sectors.
