DBS Bank Ltd (星展銀行) yesterday raised its GDP growth forecast for Taiwan this year to 4 percent from 3 percent, citing robust demand for artificial intelligence (AI)-related exports and accelerated shipment activity, which are expected to offset potential headwinds from US tariffs.
“Our GDP growth forecast for 2025 is revised up to 4 percent from 3 percent to reflect front-loaded exports and strong AI demand,” Singapore-based DBS senior economist Ma Tieying (馬鐵英) said in an online briefing.
Taiwan’s second-quarter performance beat expectations, with GDP growth likely surpassing 5 percent, driven by a 34.1 percent year-on-year increase in exports, Ma said, citing government data.
Photo: Chiang Ying-ying, AP
That surge was led by information and communications technology products, which soared 84.7 percent from a year earlier — largely due to robust shipments to the US market.
The expansionary AI cycle continues to give Taiwan an edge over other major Asian exporters, highlighting the nation’s strategic strength in the global supply chain of semiconductors and high-end electronics, Ma said.
The direct effect of new US tariffs on Taiwan would be less severe than projected in April, she said.
DBS Bank expects the direct impact of the tariffs to shave 0.2 to 0.5 percentage points off Taiwan’s GDP growth, while semiconductor tariffs could cost 0.1 to 0.3 percentage points.
About US$30 billion of Taiwanese goods, accounting for 26 percent of the country’s exports to the US, are exposed to US President Donald Trump’s tariffs, which are to take effect on Friday next week, Ma said.
Taiwan has not yet received a formal notice on the tariff rate and is seeking to finalize a trade deal with Washington before the deadline, the Executive Yuan said.
Trump has issued letters to more than 20 countries proposing tariffs of 15 percent to 50 percent. He has indicated that the US would impose 15 to 20 percent tariffs for most other trade partners and 10 to 15 percent on smaller economies.
“There’s room for Taiwan to negotiate down tariffs by opening up sensitive sectors like agriculture and autos,” Ma said, adding that US strengths in the agriculture, energy and auto sectors complement Taiwan’s prowess in electronics, chemicals and plastics.
Strategic market liberalization could ease trade tensions with the US and benefit local consumers without major domestic disruptions, she said.
On the domestic front, consumer spending faltered last quarter, as retail sales fell 2.6 percent, and vehicle and motorcycle sales dropped nearly 13 percent year-on-year.
However, the upcoming fiscal support would offset the drag in the second half, DBS Bank said.
A NT$10,000 cash handout approved by the opposition-controlled legislature could lift GDP by 0.5 percentage points, although the Cabinet remains cautious about the stimulus, it said.
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