Taiwan’s economy is poised to lose steam in the second half of this year, as trade-related uncertainties and currency appreciation weigh on export momentum, Academia Sinica said yesterday, trimming its full-year growth forecast to 2.93 percent from the 3.10 percent it projected in December last year.
The revised projection reflects concerns over the potential impact of US tariffs and a rapidly appreciating New Taiwan dollar, which could erode the price competitiveness of local exporters, the nation’s top academic institution said.
“First-half growth was driven by strong export demand, partly due to front-loaded orders ahead of possible US tariff hikes,” Academia Sinica Institute of Economics research fellow Lin Chang-ching (林常青) said. “That momentum will likely fade in the second half, as the policy outlook turns more uncertain and the NT dollar continues to climb.”
Photo: Ritchie B. Tongo, EPA
The institute’s base scenario assumes a 15 to 20 percent US tariff, an average exchange rate of NT$29 to the US dollar and partial exemptions for semiconductor-related products.
In the worst-case scenario — a 20 percent tariff, no exemptions for semiconductors and NT dollar appreciation higher than NT$28 — growth could slide to just 2.54 percent, Lin said.
A more optimistic outcome, where there is a 10 percent tariff cap and favorable trade treatment, could lift growth to as high as 3.17 percent, he said.
“Taiwan’s semiconductor supply chain is deeply integrated with the US, which offers some room for optimism,” Lin said, adding that the recent outcome of US-Vietnam trade negotiations suggested that the most extreme tariff scenarios might be avoided.
Still, the institute cautioned about sustained pressure on the NT dollar.
Institute of Economics deputy director Susan Yang (楊淑珺) said that market expectations of a weaker US dollar have become a key force behind the local currency’s appreciation.
“If that sentiment persists, it would be difficult to resist further gains in the NT dollar,” Yang said, adding that a return to the NT$27 level — last seen during US President Donald Trump’s first term — is “not out of the question,” depending on the trajectory of US interest rates and US Federal Reserve policy decisions.
Despite the external headwinds, Taiwan’s private investment is projected to grow 5.46 percent this year, bolstered by public infrastructure spending and strong capital expenditure in the semiconductor sector, particularly around artificial intelligence-driven developments.
Inflation is expected to ease to 1.85 percent from the previous estimate of 2.02 percent, helped by the stronger local currency lowering import costs, Academia Sinica said.
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, it said.
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