Nick Marro, lead for global trade & principal Asia economist at the Economic Intelligence Unit, talks about Taiwan's economic growth, from AI-related growth opportunities to tariff risks. He says that even if Taiwan does manage to secure a lower tariff rate with the US, the devil will be in the details of the trade deal.

Taipei

Taiwan's economy has experienced robust growth, largely fueled by its dominant role in the global semiconductor industry and strong external demand, particularly for technology products. The Economist Intelligence Unit forecasts Taiwan's GDP growth at 3.8%, reflecting optimism about its ability to navigate ongoing trade tensions. However, much of this growth is attributed to factors outside Taiwan's direct control, such as global demand and preemptive exports ahead of potential U.S. tariffs.

Despite the positive trade figures, domestic demand in Taiwan remains weak, with retail sales under pressure and consumer confidence low. The upcoming U.S. tariff decisions and ongoing investigations into semiconductor imports add further uncertainty. Experts caution that even with a trade deal, Taiwan will need specific exemptions or 'carveouts' to protect its vital industries, as sectoral tariffs could still pose significant challenges.

Even with a trade deal, Taiwan will need 'carveouts': Economist

How successful has Lai Ching-tao been in leading Taiwan's economy? Of course, a lot of it is fueled and centered around the semiconductor space. Yeah, this is really interesting. So on balance, we at EIU are actually very bullish for the Taiwan's economy. Our real GDP forecast for this year is around 3.8% annually. That is the higher end market consensus. And the reason for that is very much Taiwan's ability to navigate trade tensions quite well. A lot of this reflects factors that are somewhat out of Taiwan's control. So exports over the past half year have been booming. A lot of that reflects Taiwan's very competitive role in global technology supply chains, its ability to capitalize on demands tied to artificial intelligence, but also reflects front-loading activities ahead of U.S. tariffs and all of the anxieties attached to that. Now, what that means is that as front-loading trends fade, we are expecting to see a payback in this demand, which was brought forward from the second half 2025 and now as a result will no longer exist as we move into the later part of this year. That suggests there is going to be a correction and the boom that we're seeing in Taiwanese economic activity, it could be transitory. Beyond that, however, you'll notice that everything I'm talking about right now is very much tied to external demand, trade. The domestic demand situation in Taiwan is a lot less rosy. Retail sales have been under significant pressure, reflecting the fact that households are still very anxious about spending. The boom that we're seeing from the trade side hasn't necessarily filtered into the rest of the economy, and that's something where the government has really, really struggled to rebalance discussions around, say, consumer confidence, around low wage growth, around narrow employment opportunities. And so it's very much a mixed picture. Yes, we are quite bullish about the Taiwanese economy, but when we look at some of the structural factors beyond where this growth is coming from, it's a much more nuanced picture. And in many ways, it's a very unbalanced and somewhat pessimistic picture in the sense that the average Taiwanese might not necessarily be feeling the effects of this recent trade boom. The tariff deadline is this Friday, August the 1st, and we haven't really heard anything on the Taiwan tariff rate. Do you think that's because, you know, I mean, there was that whole thing about Taiwan being labeled in that whole chart as a country that kind of, you know, miffed China. They didn't like that. China having their talks today with the United States. Do you think Taiwan will hear a rate this week? I think Taiwan is hoping that it'll hear a rate this week. We're also hoping as well to make sure our forecast stayed intact. But I think it is interesting. I mean, one, this U.S.-Taiwan direct bilateral trade discussion is only part of the story. And the reason I mention that is because the U.S. is also considering a separate investigation, or is conducting a separate investigation specifically into semiconductor imports and the imports of derivative devices, so electronics. And that matters for Taiwan because these are the most important product categories that Taiwan ships to the U.S. Even if the U.S. and Taiwan strike a trade deal, if Taiwan is not able to get any exemptions tied to the separate sectoral tariff investigations, then it's still going to be in trouble. Because, you know, regardless of what the Taiwan specific duty rate is, if it's not able to get carve-outs, then its industry is still going to face a very very steep uphill battle. And the reason why I mention that is we've seen precedent of that. We've seen other trade frameworks struck whereby we're not seeing exemptions to say metals tariffs, for example. And so the verdict is still very much out in terms of what Taiwan can do to navigate this. And so as a result, this uncertainty is going to be at an all-time high this week. So let's see what happens.

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