Mon, Aug 18, 2025 page9

• Economists warn on tariffs, weak consumption

  • Staff writer, with CNA
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  Although the government on Friday raised its GDP growth forecast for this year to 4.45 percent due to stronger-than-expected artificial intelligence (AI)-driven exports, economists said that US tariffs and weak domestic consumption could hurt growth momentum in the coming months.

  The US imposed a baseline tariff of 20 percent on goods made in Taiwan that took effect on Aug. 7, higher than the 15 percent tariffs imposed on goods made in Japan and South Korea, raising concern over the tariff’s impact on Taiwan’s economy.

  US tariff policy remains a major uncertainty for Taiwan’s economy, and the government needs to clearly assess its economic impact, the Taiwan Institute of Economic Research’s Economic Forecasting Center director Gordon Sun (孫明德) said.

  

  A man shops for instant noodles at a supermarket in Taipei’s Beitou District on July 28.

  Photo: CNA

  However, Taiwan’s exports would remain stable in the coming months, because 70 percent of its exports are information and communications technology products, which are currently unaffected by the US tariffs, Sun said.

  The other 30 percent are exports of products from non-tech industries, which have come under pressure, but most of those exports tend to go to China and Southeast Asia, not the US, and therefore should not be too badly affected, he said.

  In addition, the government has also introduced support programs for exporters and subsidies for affected industries, which could function as “insurance” to soften the blow, he said.

  The bigger economic challenge for Taiwan in the coming months is domestic demand, he said.

  Retail sales fell 0.4 percent year-on-year in the first half of this year, and 2.9 percent in June alone, he said, citing data from the Ministry of Economic Affairs.

  There are two reasons for weak consumption: uncertainty over the tariffs, which has delayed car purchases, and a cooling property market after government measures against speculation, which has hurt consumer confidence, he said.

  To boost confidence, the government must take more proactive measures, such as universal cash handouts to stimulate demand and monetary easing by the central bank, Sun said.

  National Central University Research Center for Taiwan Economic Development director Dachrahn Wu (吳大任) said that US President Donald Trump’s tariff policy is aimed at forcing companies to invest and produce in the US.

  That could squeeze domestic investment and drive high-paying jobs overseas, severely damaging Taiwan’s domestic demand, Wu said.

  Businesses must be mentally prepared for a long struggle, as tariffs have become the new normal regardless of US leadership, National Central University economics professor Chiou Jiunn-rong (邱俊榮) said.

  Trump’s broader tariff war could restructure supply chains and alter global business cycles, slowing growth for years, and while subsidies could help affected industries in the short term, they risked leaving uncompetitive industries stagnant, Chiou said.

  In the longer term, Taiwan needs to consolidate its strength in semiconductors and reinforce sectors less exposed to tariffs, including applications, software and smart systems, to maintain competitiveness amid economic uncertainty, he said.

  The academics’ comments came after the Directorate-General of Budget, Accounting and Statistics (DGBAS) on Friday sharply raised its GDP growth forecast for this year to 4.45 percent from the 3.1 percent it estimated in May.

  It attributed the upward revision to a surge in exports and private investment driven by strong AI demand.

  However, the DGBAS revised growth in private consumption down to 0.85 percent. Of the 4.45 percent projected gains in GDP, net external demand contributed 2.71 percentage points, while private consumption contributed only 0.4 percentage points, the DGBAS said.
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