Uncertainty persists: A display of a semiconductor chip made by TSMC in Taipei. Taiwanese firms which have US capacity such as TSMC may be exempted, but how that plays out for firms without capex commitment remains unclear. — AFP
TAIPEI: Taiwan’s trade surplus with the United States has exceeded its full-year record in just seven months, as a global boom in artificial intelligence (AI) fuels demand for its tech products.
US-bound shipments from Taiwan rose nearly 63% in July from a year earlier to US$18.6bil, the Finance Ministry said in a statement last Friday.
That brought the island’s trade surplus with the world’s largest economy to almost US$70bil for January-July, already surpassing the yearly record set in 2024.
The latest reading showed no sign of a slowdown, with overall exports soaring 42% in July from a year earlier, the biggest gain in 15 years and far more than forecast by any economist in a Bloomberg survey.
Exports benefitted from the rapid development of innovative applications in AI, as well as this month’s deadline for US tariffs to take effect, the ministry said in the statement.
It expects full-year exports to reach US$500bil for the first time ever.
The current full-year record for exports was US$479bil set in 2022.
Taiwan has been cashing in on surging demand for AI around the world, racking up an unprecedented trade surplus with the United States that’s drawn President Donald Trump’s ire.
The export growth in July was somewhat overstated given the strong appreciation of Taiwan dollar, said Michelle Lam, Greater China economist at Societe Generale SA.
“While we do expect some moderation ahead as front-loading activities ease, the strength of AI demand has remained solid.”
Last week, the US announced a 20% tariff on goods from Taiwan – which the government in Taipei has called temporary but a rate higher than those imposed on regional rivals including Japan and South Korea. The move sparked concerns that it risks undermining the competitiveness of Taiwanese companies.
But for Taiwan, even more significant are national security reviews known as Section 232 investigations into semiconductor-related products.
At stake in the probes led by the US Department of Commerce are goods that account for some 80% of Taiwan’s US-bound exports, which are currently subject to exemptions.
Last Wednesday, Trump said the tariff rate on chips would be set at 100%, but promised there would be no charge “if you’re building in the United States of America”.
Investors have interpreted the comment as a positive signal for the island’s largest firm, Taiwan Semiconductor Manufacturing Co (TSMC), the go-to supplier of advanced chips for Apple Inc and Nvidia Corp.
TSMC has been actively investing in US production facilities, which could potentially shield it from the steep tariffs.
“Uncertainty remains to what extent the 100% chip tariff will affect Taiwan’s chip exports,” Lam said.
“Firms which have US capacity such as TSMC may be exempted, but how that plays out for firms without capex commitment remain unclear.”
The Taiwan government expects exports to grow between 17% and 22% year-on-year next month, even as some traditional industries and mid-sized companies may come under pressure from the new 20% tariff, said Beatrice Tsai, Director General of the Ministry’s Department of Statistics, at a briefing last Friday.
She also said the government is likely to raise its forecasts for economic growth, both for the third quarter and the full year of 2025.
The updated projections will be released this Friday. — Bloomberg
