Steady Expansion Amid Trade Uncertainty
Taiwan’s economy continued to demonstrate resilience in March 2025, supported by robust exports and sustained growth in the semiconductor sector. However, concerns over potential U.S. tariffs and persistent inflation pressures have moderated optimism.
Export performance remained strong in March, though growth moderated due to a high base effect. According to the Ministry of Finance, exports rose 4.3% year-over-year (YoY) to US$39.5 billion, marking the 17th consecutive month of expansion. Export growth was driven by continued strong demand for semiconductors and information and communication technology (ICT) products.
Export orders for the month climbed 2.6% YoY to US$54.1 billion, supported by AI-driven demand for electronic components and servers. The trade surplus for the first quarter expanded to US$23.8 billion, up 44.6% compared with the same period last year.
Industrial production extended its upward trend, albeit at a slower pace. The Industrial Production Index rose 7.2% YoY, with manufacturing output increasing by 7.9%. Growth continues to be led by the electronic components sector, particularly semiconductor production.
The semiconductor industry remains the backbone of Taiwan’s economy, with production and export data indicating sustained growth. In March, export orders for electronic products rose 8.4% YoY to US$19.3 billion. Semiconductor output also remained strong, contributing significantly to the overall increase in manufacturing production.
In a strategic move to increase production closer to customers, TSMC announced in early March a US$100 billion investment plan to further expand its operations in the United States. The initiative, co-announced with President Trump, aims to build new fabrication plants and R&D centers, aligning with U.S. objectives to boost domestic chip production.
Private and public sector investments continued to support economic growth in early 2025. Approved foreign direct investment inflows reached US$3.2 billion in the first quarter of 2025, up 19.6% YoY, according to the Ministry of Economic Affairs (MOEA). The increase was driven primarily by reinvestments from semiconductor and renewable energy companies expanding local operations.
Public sector investment also gained momentum. In March, the Executive Yuan approved an additional NT$120 billion (US$3.8 billion) infrastructure budget for 2025, targeting green energy, digital infrastructure, and public housing projects. The supplementary budget is expected to stimulate domestic demand, offset potential export headwinds, and support the government’s net-zero carbon emissions goal by 2050. Analysts project the spending injection will lift public investment growth by approximately 5% this year.
Despite these positive indicators, Taiwan’s export-driven economy faces growing risks from U.S. trade policy changes. The Trump administration has floated the possibility of imposing tariffs on Taiwanese technology exports, prompting U.S. buyers to accelerate orders. In addition to technology exports, the Trump administration’s announcement in March of a renewed 25% tariff on certain steel imports – including those from Taiwan – has sparked debate over its potential economic impact.
The MOEA has warned that the tariffs could dampen Taiwan’s steel exports to the United States, which totaled US$1.2 billion in 2024, and put pressure on domestic producers. Industry groups caution that smaller steelmakers may face shrinking profit margins and a decline in overseas orders. Still, some analysts contend that the tariffs could push Taiwanese manufacturers to move up the value chain and diversify export markets, ultimately enhancing the sector’s long-term competitiveness. The government said it will continue talks with U.S. trade authorities, seeking to secure exemptions or other forms of relief.
Costs Rise, Confidence Drops
On the domestic front, consumer confidence weakened in March amid concerns over rising living costs. The consumer confidence index fell to 71.86, the lowest level in 11 months. The decline was primarily driven by fears of an upcoming electricity rate hike in April, according to a survey by the Taiwan Economic Development Research Center at National Central University.
Despite the dip in sentiment, private consumption remains high, supported by a strong labor market and rising incomes. As a result, the Directorate General of Budget, Accounting and Statistics (DGBAS) projects private consumption to grow 2.1% in 2025, aided by wage increases and accumulated household savings.
Unemployment in March fell to 3.32%, down from 3.34% in February, marking the lowest level for March in 25 years. The seasonally adjusted unemployment rate stood at 3.33%. Labor force participation reached 59.35%, a 36-year high for March.
Taiwan’s inflationary pressures eased in March. The Consumer Price Index rose 1.93% YoY, down from 2.12% in February. DGBAS attributed the moderation to declining food and fuel prices, though service prices remained elevated.
Taiwan’s real estate market shows signs of cooling after a period of rapid growth. Property transactions in the first quarter of 2025 fell 22% YoY. Surveys indicate increasing buyer caution due to tighter mortgage regulations and affordability concerns. The Central Bank’s credit controls have curbed speculative activity, leading to a more balanced market. Transaction volumes are expected to remain subdued, with sellers under pressure to offer price concessions.
The Central Bank maintained its benchmark discount rate at 2.00% during its March meeting, the fourth consecutive quarter without a change. Policymakers cited moderate inflation and external uncertainties, including potential U.S. tariffs, as reasons for the cautious stance. Credit controls on housing loans remain in place to cool the real estate market.
Taiwan’s export-driven economy remains vulnerable to fluctuations in global financial markets and currency movements. In March, the New Taiwan Dollar weakened slightly against the U.S. Dollar, ending the month at NT$31.65, down from NT$31.20 at the end of February. Analysts attributed the depreciation to heightened concerns over U.S.-China geopolitical tensions and speculation about potential tariff increases on Taiwanese exports. While a weaker currency can bolster export competitiveness, it also raises the cost of imported energy and raw materials, adding to inflationary pressures. The Central Bank said it would continue to monitor foreign exchange markets to safeguard financial stability.
