Taiwan lifts 2025 GDP forecast despite Trump tariff threats

TAIWAN raised its forecast for economic growth next year, even though the return of US President-elect Donald Trump threatens to disrupt trade.  

The economy is expected to expand 3.29 per cent in 2025, according to an estimate released by the statistics bureau in Taipei on Friday (Nov 29). That compares with the previous prediction of 3.26 per cent. Gross domestic production is expected to grow 4.27 per cent in 2024, versus the earlier forecast of 3.9 per cent.

Third quarter growth came in at 4.17 per cent on year, versus the government’s earlier estimate of 3.97 per cent.

The looming return of Trump complicates the economic outlook for Taiwan, which counts China and the US as major trade partners. This week, Trump promised an additional 10 per cent levy on Chinese goods in retribution for what he said was Beijing’s failure to stop the flow of drugs into the US.

Even without new levies, trade tensions between China and the US “would hit Japan, South Korea and Taiwan hard,” Moody’s Analytics wrote in a note dated on Sunday. Economic damage in 2025 and 2026 “will be larger in Taiwan, given its heightened exposure to the US and China,” the financial services company said in the note written by analysts including senior economist Stefan Angrick.

Moody’s also said there were reasons to believe any levies placed on the three “will be modest relative to international peers” given they have leverage as big investors in the US.

Taiwan has been one of the best-performing economies in Asia this year, driven by global demand for its high-tech products. AI leaders like Nvidia, Microsoft and OpenAI are increasingly turning to the archipelago’s companies to fabricate their chips, build their servers and cool their devices.

That performance has allowed the central bank to keep its benchmark interest rate at the highest level in 16 years, raise the amount of funds banks must hold in reserve and roll out a range of curbs to cool a red-hot property market.   

Taiwan is likely to hold rates steady in 2025 as it keeps its “focus on managing overall financial stability,” William Deng, Asia and China economist of UBS Investment Bank, wrote in a note on Monday.

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The central bank will announce its next rate decision on Dec 19. BLOOMBERG