Taiwan’s export-oriented economy is expected to grow by less than 3 percent this year, as heavier-than-expected “reciprocal” US tariffs of 32 percent are to deal a blow to the nation’s manufacturing sector and exports, analysts and economists said.
Taiwan’s first-order impact could be significant, as its reciprocal tariff rate is unexpectedly high at 32 percent, DBS Group Holdings Ltd economist Ma Tieying (馬鐵英) said in a report yesterday.
That is above the Asian average of 28 percent and the overall average of 29 percent across the 60 affected nations, Ma said.
Photo: CNA
The second-order impact further exacerbates Taiwan’s vulnerability, she added.
“We foresee significant downside risks to our GDP growth forecasts for 2025 and 2026, currently projected at 3 percent and 2.4 percent, with particular concern from the 2026 outlook,” Ma said in the report. “Taiwan’s vulnerability stems from its high exposures to the US export market.”
Taiwan’s exports to the US last year accounted for 23 percent of total exports and 14 percent of nominal GDP, making the nation the second-most vulnerable economy in Asia to the first-order impact of reciprocal tariffs, just behind Vietnam, the report said.
As Taiwan’s GDP is highly dependent on exports for growth, the second-order impacts on Taiwan could also be significant, as the US and global economy are at risk of recession, with shrinking trade volumes in major economies such as the US, China, Japan and Europe.
Exports accounted for 63 percent of Taiwan’s nominal GDP last year, the fifth-highest level in Asia.
“This high dependence on exports makes Taiwan particularly vulnerable to a global economic downturn,” Ma said.
By segment, the electronics, plastics and textile sectors would be affected the most by the tariffs, as semiconductor, steel and pharmaceuticals imports to the US are tentatively spared from the duty, Yuanta Securities Investment Consulting Co (元大投顧) said in a report on Thursday.
“If all the tariffs take effect as scheduled, Taiwan’s economic growth this year will be less than 3 percent,” the investment consultancy said.
The estimate includes indirect impact from the decline in global trade and the economy.
Yuanta expects US tariffs to reduce GDP growth by 0.8 percentage points directly and 0.24 percentage points indirectly from its original forecast.
Taiwan’s GDP could grow just 2 percent on an annual basis this year, as the US tariffs would weaken exports, Cathay Securities Corp (國泰證券) said in a separate report on Thursday.
That would be significantly lower than the 3.14 percent growth forecast by the Directorate-General of Budget, Accounting and Statistics in February.
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