Growing like ‘gangbusters’: Can Taiwan maintain its economic momentum?

A Pacific land has go 1 of the biggest economical occurrence stories of the twelvemonth truthful far.

Taiwan has witnessed a melodramatic roar successful caller months driven by the mania for artificial quality (AI). Earlier this year, its banal speech soared to go the 5th largest successful the satellite based connected marketplace capitalisation, the worth of its publically traded shares, overtaking the United Kingdom, Canada and India.

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Much of that upward momentum has been driven by AI and different exertion exports highly sought aft by the United States.

Last year, the US imported $201bn worthy of goods from Taiwan, astir treble its complaint from 2024, erstwhile it acquired $116bn successful imports. In May, Taiwan eclipsed China to go the third-largest root of US imports, aft Mexico and Canada.

Experts person described Taiwan’s marketplace acceleration arsenic a instrumentality to its presumption arsenic a “tiger economy” — a word utilized to seizure surging maturation successful East Asia. Much of the credit, they say, falls to its flourishing exertion sector.

“Artificial quality helps explicate the rising value of Taiwan,” said Chad Bown, a elder chap astatine the Peterson Institute for International Economics.

But critics pass that, portion Taiwan’s marketplace remains strong, factors similar tumultuous planetary relations, arsenic good arsenic demographic concerns, could complicate the island’s semipermanent outlook.

“It seems to beryllium a win-win for now,” said Reza Hasmath, an world module advisor astatine The China Institute astatine the University of Alberta. “But Taiwan is conscionable postponing a world that’s not sustainable.”

An economical boom

Taiwan’s thriving export marketplace helped boost its gross home merchandise (GDP) to 8.63 percent successful 2025.

That rocket-ship trajectory continued into the archetypal 4th of this year, erstwhile the GDP saw an exhilarating 13.69 percent rise.

Government information released connected Friday showed that the land is continuing that momentum, with its system increasing an awesome 12.92 percent successful the 2nd 4th of the year, which ended successful June.

“The GDP maturation is going similar gangbusters,” said Dexter Tiff Roberts, nonresident elder chap astatine the Atlantic Council’s Global China Hub.

Roberts expects the inclination to beryllium “long term”, arsenic Taiwan produces astir 90 percent of the precocious chips utilized to powerfulness starring AI models.

“That’s not going to spell away. We cognize the world, and the US, needs this,” helium added.

While the AI roar is simply a planetary phenomenon, the US has go a large marketplace for specified chips, with billions of dollars flowing into the manufacture each year.

US President Donald Trump, meanwhile, has pledged to bolster his country’s presumption arsenic “the satellite person successful artificial intelligence”. His medication has claimed to pull much than $2.7 trillion successful tech and AI investments since the commencement of his 2nd term.

To unafraid US entree to Taiwan’s cutting-edge semiconductor technology, the Trump medication signed an agreement nether which Taiwan volition put $500bn successful the US.

Half of that magnitude is expected to travel successful the signifier of nonstop investments by Taiwanese semiconductor and tech firms, including done the improvement of onshore tech manufacturing.

The remainder is mostly comprised of recognition guarantees for further investments from Taiwan successful the US.

Under the agreement, Taiwanese firms would beryllium allowed to import 2.5 times the capableness of their US factories, without fearfulness of steep tariffs.

In a consequent commercialized agreement, Taiwan agreed to trim its tariffs connected 99 percent of US exports.

Taiwan has besides boosted its tech exports to the US done investments successful adjacent Mexico, with cross-border plants manufacturing inputs for information centres successful Texas.

‘Unbalanced relationship’

But Hasmath, the module advisor astatine the University of Alberta, warns that determination are troubling signs connected the skyline for Taiwan-US relations.

Trump has agelong sought to destruct commercialized deficits with US economical allies, and helium has lashed retired astatine countries that export much to the US than they import.

Hasmath pointed retired that Taiwan is gathering a robust commercialized surplus with the US, adjacent to $200bn and counting. That could spark a backlash.

“This is an unbalanced narration and not conducive to Taiwan successful the agelong term,” Hasmath warned.

Trump volition not tolerate a hefty commercialized surplus for long, helium added. Hasmath believes the US president volition soon look to renegotiate his country’s deals with Taipei.

Roberts astatine the Atlantic Council, meanwhile, warned that Trump is “mercurial” — and with specified a temperament comes “uncertainty”.

Then there’s the question of governmental upheaval successful the US. Trump’s support ratings are low, and helium is ineligible nether US instrumentality to tally for a 3rd word arsenic president.

Demographic problems

While Taiwan’s economical roar is “very real” and “very obvious”, Roberts said determination are wide vulnerabilities adjacent connected the home front.

Taiwan’s accepted export sectors similar plastics and textiles are underperforming. Plus, Roberts pointed retired that lone a tiny fraction of the Taiwanese colonisation is progressive successful the AI sector.

“A bulk of the younger colonisation is not successful hullo tech, truthful that’s a existent problem,” helium said.

While the booming banal marketplace has sparked a “wealth effect” — those with rising portfolios consciousness richer and are much inclined to walk — that helps the wider colonisation lone to an extent.

With astir of Taiwan’s employment concentrated extracurricular of the AI sector, economists person warned that the land could make what’s called a K-shaped economy, wherever the affluent spot growth, portion the poorer segments of nine stagnate oregon decline.

The spot manufacture employs up to 350,000 radical astatine most, experts say.

Meanwhile, TSMC, Taiwan’s biggest spot company, makes up to 40 percent of the banal marketplace and provides 4 percent of the island’s GDP growth. That lopsided proportionality is “unsustainable”, according to Hasmath.

Plus, Taiwan has a rapidly ageing population, with astir a 5th of its colonisation implicit the property of 65.

The land besides has different vulnerabilities. For example, it relies heavy connected overseas imports of vigor products, peculiarly oil, and has struggled with h2o scarcity.

Then, there’s the superpower adjacent door: China. The authorities successful Beijing considers Taiwan, a self-governing island, arsenic its ain territory, and it has taken assertive measures to bounds the island’s quality to found diplomatic relations of its own.

That struggle has added substance to the statement astir Taiwan’s growth, with a spokesperson for the Chinese authorities reportedly saying the island’s increasing proximity to the US tech assemblage volition “drain Taiwan’s economical interests” and “hollow out” the country’s large industry.

Hasmath said that, if the AI roar backfires connected Taiwan, each of that yet adds up to a “recipe for electoral change, a displacement successful government” successful Taipei.