Taiwan’s Tech-Fueled Resilience Faces a Fresh Tariff Test

Taiwan’s growth engine is still running on chips. Flagship names such as TSMC notched record quarterly profits on the back of generative-AI-driven orders and the global push to secure leading-edge logic capacity. Export data show double-digit gains in integrated-circuit shipments through late spring, more than compensating for softness in consumer electronics. With a deep backlog for cutting-edge nodes and an ongoing build-out of overseas fabs, that momentum should bleed into the second half even if end-market demand for smartphones and PCs stays uneven.

Policymakers are nevertheless bracing for cross-currents. The central bank, which surprised markets with a small policy hike in March, remains on watch for further imported-inflation pressures if a new tariff round sticks. At the same time, any escalation in Washington–Beijing tensions that spills over to Taipei could tighten global supply-chain scrutiny and re-price Taiwan’s risk premium. Early indications suggest the economics ministry will lean on fiscal incentives and expedited power-capacity approvals to keep investment pipelines intact, but management teams have started to flag contingency plans ranging from customer-financed inventory buffers to selective diversification into Southeast Asia.

For now, the base case still calls for full-year GDP growth north of 4 %, underpinned by a wave of high-value-added capital expenditure and steady services recovery as tourism normalises. The July-31 data release will offer the clearest snapshot yet of whether Taiwan can out-grow an increasingly fractious trade backdrop. A substantial beat could reinforce confidence that advanced manufacturing demand trumps tariff uncertainty; a miss would revive debate over how concentrated the island’s fortunes have become in a single, if strategically vital, sector.