Taiwan’s Economic Growth Forecast Lowered Due to U.S. Tariffs and Domestic Budget Reductions

Taiwan’s trade-dependent economy is projected to grow more slowly in 2025 than earlier predicted, facing potential disruptions from tariffs that the United States may impose, along with budget cuts enforced by the parliament.
As a crucial part of the global tech supply chain for companies like Apple Inc. and Nvidia, Taiwan is home to the world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co. (TSMC).
U.S. President Donald Trump has proposed a minimum 25% tariff on chips, prompting Taiwan to respond diplomatically and express interest in discussing chip investments in the U.S. The United States is Taiwan’s second-largest export market, following China.
The Trump administration’s tariff plans are seen as a significant threat to global trade, potentially exacerbating inflation and heightening economic uncertainty, according to Taiwan’s Directorate General of Budget, Accounting and Statistics. The agency warned that Taiwan’s exports could start feeling the impact of these tariffs as early as the third or fourth quarter.
Taiwan’s GDP for the current year is now forecast to grow by 3.14%, a slight downward revision from the previous forecast of 3.29% issued in November. This growth rate is lower than the 4.59% projected for 2024.
Additionally, budget cuts imposed by Taiwan’s opposition-controlled parliament are expected to further dampen economic growth due to reduced government spending and investment. Despite these challenges, exports for the year are expected to rise by 7.08%, up from the previous estimate of 5.98%.
The forecast for Taiwan’s consumer price index (CPI) in 2025 has been slightly increased to 1.94%, from 1.93%. The economy grew by 2.9% in the fourth quarter compared to the previous year, an upward revision from the initial 1.84% estimate.