Taiwan's Q2 Economic Growth Expected to Outpace Q1 on Strong Tech Demand

Taiwan's economy is expected to have grown 5.7% YoY in Q2 2025, driven by strong tech demand. However, US tariffs continue to cloud the outlook. Economists' forecasts vary widely, ranging from 4.1% to 8% growth. Taiwan's trade-driven economy could be substantially affected this year if US President Donald Trump follows through with his tariff policy.

Taiwan's economy is expected to have grown 5.7% year-over-year (YoY) in Q2 2025, driven by strong tech demand, according to recent forecasts. However, US tariffs continue to cloud the outlook. Economists' forecasts vary widely, ranging from 4.1% to 8% growth, reflecting the uncertainty surrounding trade relations with the United States.

Ma Tieying, an economist at DBS Group Holdings Ltd, expressed concerns about the impact of US reciprocal tariffs on Taiwan's economy. While concerns about tariffs on semiconductors have eased since April, they remain a major challenge. If tariffs are restricted only to chips, the impact on Taiwan should be relatively contained [1]. Taiwan's Q2 GDP could greatly exceed expectations, driven by strong exports, and the 2025 full-year GDP forecast has been raised to 4% from the original 3% [1].

Taiwan's economic growth is expected to slow in the second half of 2025, despite continued demand for AI. The Taiwan Institute of Economic Research (TIER) revised its forecast for Taiwan's economic growth in 2025 to 3.02%, driven by stronger-than-expected exports and private investments [4]. However, the uncertainty surrounding tariff talks with the United States has hit private consumption, leading to a decline in auto sales and retail sales during the first six months of the year.

The US government's investigation into chip imports is expected to have results within two weeks, potentially paving the way for new tariffs on all things silicon. This could significantly impact Taiwan's economy, as it is a major producer of semiconductors. TSMC, the world's leading chip producer, has made history as the first Asian company to achieve a market capitalization of $1 trillion, driven by the continuous global demand for advanced AI chips [2].

In response to potential tariffs, TSMC has committed an additional $100 billion to its already pledged $65 billion for advanced semiconductor production in Phoenix, Arizona. This investment is part of TSMC's strategy to reduce its reliance on foreign markets and strengthen its position in the global tech supply chain [2].

The outlook for Taiwan's economy remains uncertain, with tariffs and trade talks with the United States posing significant risks. However, the strong demand for tech products, particularly AI chips, is expected to continue driving growth in the coming quarters. Investors should closely monitor the developments in US trade policy and their potential impact on Taiwan's economy.

References:
[1] https://sg.finance.yahoo.com/news/brief-dbs-economist-concerns-us-070008208.html
[2] https://menafn.com/1109850549/TSMC-Achieves-Milestone-to-Asian-Companies
[4] https://focustaiwan.tw/business/202507250016