Academia Sinica cuts Taiwan's GDP growth forecast on U.S. tariffs

Taipei, July 4 (CNA) Academia Sinica, Taiwan's top research institution, has lowered its forecast for Taiwan's gross domestic product (GDP) in 2025 to below 3 percent, citing uncertainties caused by the United States' haphazard tariff policies.

Taiwan's GDP growth is expected to hit 2.93 percent, Academia Sinica said Friday, a downgrade from its previous estimate of 3.10 percent made in December 2024.

The latest GDP forecast was more cautious than that of the government as the Directorate General of Budget, Accounting and Statistics (DGBAS) estimated in late May that Taiwan's economy will grow 3.10 percent this year.

Taiwan's GDP growth will slow to 0.53 percent and 1.06 percent in the third quarter and fourth quarter, respectively, after growing 5.48 percent and 4.97 percent in the first and second quarter, according to Academia Sinica.

Robust exports supported the relatively high rates of growth in the first two quarters of 2025, but that may not be sustainable in the second half of the year, the institution said.

There was a 37.22 percent year-over-year increase in exports in Taiwan dollar terms during the first five months of 2025 as foreign buyers rushed to place orders ahead of schedule to avoid the potential impact of U.S. President Donald Trump's tariffs, the institution said.

But export growth is expected to weaken in the coming months, hurt by the build-up of inventories in the first six months and a stronger Taiwan dollar, Academia Sinica said.

Trump first unveiled his sweeping reciprocal tariffs on April 2, which included a 32 percent across-the-board tariff on goods made in Taiwan, but he then announced a 90-day pause a week later to allow negotiations with the U.S.'s trading partners to lower the duties.

The Trump administration has also launched an investigation under Section 232 of the Trade Expansion Act of 1962 that could trigger a possible tariff on semiconductor imports.

Academia Sinica said the 2.93 percent growth estimate was made based on the assumption that Taiwan's tariffs will be lowered to 15-20 percent without any impact from the Section 232, and an exchange rate of NT$29 against the U.S. dollar.

But if the Taiwan dollar appreciates to NT$28, the reciprocal tariff is at 20 percent and a 20 percent duty is levied on semiconductors, GDP growth could fall to 2.54 percent.

As of Thursday, the Taiwan dollar had soared NT$3.953 or 13.71 percent, against the U.S. dollar since the beginning of this year.

Academia Sinica economist Lin Chang-ching (林常青) said at a news conference that after Vietnam's "reciprocal" tariff was cut to 20 percent from 46 percent, Taiwan's tariff could come down to 10-15 percent if talks proceed smoothly.

Amid uncertainties over the global economy, Lin said many companies in Taiwan are expected to slow down their pace of investment in the second half of this year, and he forecast private investment to grow 5.46 percent in 2025.

With the tariff issues and geopolitical unease sending ripples through global financial markets, Academia Sinica said consumer confidence was stagnating, and could result in anemic 1.53 percent growth in private consumption this year.

Academia Sinica has forecast Taiwan's consumer price index will rise 1.85 percent in 2025, below the 2 percent alert set by the central bank.