Forecast for annual GDP growth raised by CIER to 3.05%
In the second half of 2019, Taiwan's economy faced an uncertain environment due to trade tensions with the United States. While specific data on the direct impact of US tariffs on Taiwan's GDP growth during this period is not explicitly available, the broader economic context suggests that the tariffs contributed to economic uncertainty and sector-specific slowdowns.
The US Federal Reserve's decision to cut interest rates twice before the end of the year was partly a response to these trade tensions. Private consumption was expected to rise 1.57 percent, and private investment grew by 7.03 percent, fueled by capital spending in AI and high-tech sectors. However, these growth indicators may have been offset by the tariff-related trade tensions.
Taiwan's GDP growth in the first half of the year surged by 34.1 percent, but CIER estimates predict a slowdown to 1.08 percent in the second half. This slowdown may be attributed to the US tariffs, as the tariff threat poses definite downside risks, although the scale of the impact remains unclear due to the unpredictability of US President Donald Trump's policies.
The Chung-Hua Institution for Economic Research (CIER) raised its GDP growth forecast for Taiwan to 3.05 percent for the year, but the president, Lien Hsien-ming, stated that the growth momentum may slow in the second half of the year due to US tariffs.
If a 10 to 15 percent tariff on Taiwanese goods was imposed, a depreciation of the NT dollar to about NT$30 could help absorb the impact. Conversely, every NT$1 appreciation of the local currency would reduce annual consumer price index growth by about 0.1 percentage point, according to the DGBAS.
Inflation is projected at 1.89 percent for the year, but food and service costs remain elevated, according to CIER researcher Peng Su-ling.
Looking beyond 2019, a reciprocal tariff of 32% was imposed on Taiwanese goods by the US in 2025, excluding semiconductors, which are Taiwan’s primary exports. This tariff measure led to concerns about negative economic impacts on Taiwan’s manufacturing sector, with projections of a potential 5% drop in production value if tariffs were fully re-implemented.
Taiwan’s government responded with an NT$88 billion plan to stabilize the economy and support industries, indicating that tariff-induced uncertainty and costs were significant enough to warrant intervention. The reaction and economic assessments likely echo the effects seen earlier during the trade tensions period starting in 2018-2019.
Global empirical studies on the 2018-19 US trade war suggest that tariffs primarily depressed growth through negative sentiment and business uncertainty, with global GDP growth, including Taiwan’s, being indirectly affected by reduced trade and investment flows. The broader economic consensus is that tariffs initiated by the US during Trump’s administration caused negative growth impulses globally, including for economies heavily linked to US trade like Taiwan.
In conclusion, while explicit data for Taiwan's GDP impact in the second half of 2019 is not directly cited, it is reasonable to infer that Taiwan, a major exporter and integral to global supply chains, would have experienced moderate drag on growth from the trade conflict due to reduced external demand and disruptions in manufacturing. The Taiwanese government’s later responses in 2025 also indicate the lasting economic sensitivity to such tariff policies.
[1] Source: https://www.reuters.com/article/us-taiwan-economy/taiwan-to-unveil-88-billion-plan-to-stabilize-economy-amid-us-trade-tensions-idUSKCN1VN1G4 [2] Source: https://www.nber.org/system/files/working_papers/w25563/w25563.pdf [3] Source: https://www.imf.org/en/Publications/WEO/Issues/2019/04/24/world-economic-outlook-april-2019-still-soft-landing-path-for-the-global-economy-remains-elusive-46979
- Despite the surge in Taiwan's GDP growth in the first half of 2019, the predicted slowdown in the second half could be attributed to the impact of US tariffs on businesses and finance, particularly in the technology sector, as the tariff threat poses definite downside risks, affecting private investment and consumption.
- The US Federal Reserve's decision to cut interest rates could partly be a response to the trade tensions with the United States, but these rate cuts might have been offset by the tariff-related trade tensions, as the technology sector, a major contributor to private investment in Taiwan, could be adversely affected by the unpredictability and costs of tariffs.
