Stock of Taiwan may potentially decline on Wednesday
The Taiwan Stock Exchange (TSE) finished higher on Tuesday, marking an end to a two-day losing streak, but the market remains under pressure due to ongoing trade tensions with the United States.
On Tuesday, the TSE index soared 281.65 points or 1.20 percent to finish at 23,660.59. However, the exchange saw gains from technology stocks, while plastics and the financial sector were mixed.
Taiwan Semiconductor Manufacturing Company strengthened 1.32 percent, and United Microelectronics Corporation added 0.49 percent. On the other hand, Mega Financial saw a decrease of 0.23 percent, and First Financial advanced 0.99 percent. E Sun Financial perked 0.15 percent.
The positive reaction to some of the latest earnings news, including upbeat quarterly results from software company Palantir (PLTR), benefitted the session. However, the session was also affected by the OPEC's decision to boost production, which contributed to the fall in crude oil prices. West Texas Intermediate crude for September delivery slumped $1.05 or 1.58 percent to $65.24 per barrel on Tuesday.
The ongoing trade tensions between the U.S. and Taiwan are causing significant economic pressure. The U.S. is set to impose an additional 20 percent reciprocal tariff on Taiwanese imports, effective August 7, 2025. This tariff, on top of existing most favored nation (MFN) duties and other trade remedy tariffs, raises the effective tariff burden significantly.
Taiwan is under intense pressure to match large investment commitments—on the order of US$300-400 billion—to qualify for a lower, 15 percent tariff tier. This sum is comparable to four years of the Taiwanese government's budget. The situation is unresolved, with negotiations ongoing and no final agreement reached.
Taiwanese industrial and labor groups warn that the cumulative tariffs could severely damage key manufacturing sectors such as machinery, ICT (information and communication technology), machine tools, screws, bicycles, and textiles. There are reports of factories being put up for sale, signaling distress in the sector and potential risks of mass job losses. These groups are urging Taiwan's government to negotiate with the U.S. for lower tariffs and seek relief measures.
The Taiwanese government announced an emergency budget proposal around US$3.1 billion intended to relieve financial pressure on enterprises affected by the tariffs.
The tariffs are part of U.S. policy measures launched under the so-called "Liberation Day" tariff campaign, aiming to impose reciprocal duties equal to those faced by American exporters. Taiwan is one of the few major partners that have yet to reach a final tariff agreement after Japan and South Korea. Diplomatic tensions and U.S.-China trade dynamics are intertwined with these tariff measures, affecting both direct Taiwan-U.S. relations and regional stability.
The market uncertainty and volatility put downward pressure on investor confidence, especially in industrial and export-dependent firms listed on the TSE. Stocks in manufacturing-heavy sectors, such as machinery, ICT, and textiles, face increased risk. The reported factory sales in Taiwan industrial parks further reflect potential economic contraction risks, which can translate into negative sentiment on the TSE.
President Donald Trump plans to announce new tariffs on semiconductors and chips as soon as next week, adding to the market uncertainty.
In summary, the U.S. 20 percent tariff on Taiwan's exports, with the threat of higher rates unless Taiwan commits vast investments, is exerting significant economic pressure. This is shaking industrial sectors and dampening market confidence, which is negatively affecting Taiwan's stock market environment. The government seeks to negotiate reductions and has allocated emergency funds to buffer impacts, though uncertainty remains high.
- The positive performance of technology stocks on the TSE, as evidenced by Taiwan Semiconductor Manufacturing Company and United Microelectronics Corporation, contrasts with the ongoing economic pressure caused by the trade tensions between the U.S. and Taiwan, particularly the imposition of the 20 percent reciprocal tariff on Taiwanese imports.
- Despite the uncertainty caused by the threat of additional tariffs on semiconductors and chips, the TSE index showed a lift on Tuesday, with gains from technology stocks, underscoring the resilience of this sector amidst broader market pressures.
