Taiwan Think Tank Raises 2024 GDP Forecast to 4.03% Amid Potential Trade Impacts from Trump Administration Policies
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- 07 Nov 2024
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The Taiwan Institute of Economic Research (TIER) has increased its GDP growth forecast for Taiwan to 4.03% in 2024, citing strong domestic demand and a solid export sector driven by information and communication technology products. However, the think tank cautions that the return of Donald Trump to the U.S. presidency in 2025 could introduce uncertainties for Taiwan’s trade landscape, with potential policy shifts that may impact economic performance in the coming years.
Factors Supporting Taiwan’s Economic Growth in 2024
TIER’s revised forecast reflects optimism in Taiwan’s domestic and international economic environment. Key factors supporting the 4.03% growth estimate include:
i. Robust Demand for Information and Communication Products: With global demand for information and communication technology remaining high, Taiwan’s exports in this sector continue to show resilience. The strong performance in this field has helped offset weaknesses in other export categories, particularly those affected by overproduction in China and the depreciating Japanese yen.
ii. Recovery in Global Markets: TIER highlights improving economic prospects in Europe, Japan, and emerging markets, which is expected to boost Taiwan’s export sector. As these regions continue to recover, they provide valuable markets for Taiwan’s high-tech exports and other manufactured goods, supporting Taiwan’s trade growth.
iii. Domestic Investment and Consumption Stability: Taiwan’s internal demand remains stable, with consistent domestic investment contributing to GDP growth. This internal stability, combined with export strength, has allowed Taiwan to achieve positive economic momentum even amidst global challenges.
Challenges Ahead: Potential Impacts of Trump Administration Policies
While Taiwan’s economy is projected to maintain growth through 2024, TIER warns that Trump’s return to the White House in 2025 could affect Taiwan’s trade performance. Key areas of concern include:
i. Increased Tariffs: Trump’s administration previously imposed tariffs on several trading partners, including China. A renewed focus on tariffs could impact Taiwan’s trade relationships, especially if the U.S. seeks to limit imports from China and countries with strong trade ties to the U.S.
ii. Shift in U.S. Green Policies: TIER notes that Trump may reverse green subsidies and inflation control measures enacted by the Biden administration. Such moves could reshape U.S. demand for technology products and renewable energy components, sectors in which Taiwan has significant exports.
iii. Focus on Revitalizing U.S. Manufacturing: Trump has previously emphasized the need to revitalize American manufacturing sectors, including petrochemicals, which could lead to increased competition for Taiwan’s manufacturing industry. Taiwan may also face pressure if Trump reintroduces measures encouraging domestic production of semiconductor components.
iv. Changes in Defense and Regional Alliances: Trump’s approach to foreign relations often includes calls for allies to increase their defense spending, which could impact Taiwan’s regional allies and indirectly influence trade dynamics in Asia. Changes in the U.S.-China relationship may also affect Taiwan, especially in sectors related to technology and manufacturing.
TIER projects a more modest growth rate of 3.15% for 2025, acknowledging that while the global economy shows signs of recovery, potential trade tensions could affect Taiwan. Unknowns around the Trump administration’s trade policies add a layer of unpredictability for Taiwan’s export-reliant economy. However, strong markets in regions such as Europe, Japan, Southeast Asia, and Latin America provide opportunities to diversify Taiwan’s export destinations and minimize the impact of U.S.-China tensions.
With a strong GDP growth forecast for 2024, Taiwan is positioned to capitalize on favorable domestic demand and growing exports in high-tech sectors. However, the anticipated shifts in U.S. trade policy under Trump’s administration in 2025 underscore the need for Taiwan to diversify its trade partners and strengthen its competitive edge. Through continued investment in technology and market expansion, Taiwan can aim to sustain stable growth even in the face of external pressures.
