Slide in consumer trust persists
U.S.-Taiwan Trade Uncertainties Dampen Investor Confidence and Economy
Investors remain apprehensive about the potential for trade negotiations with the U.S. to deteriorate, due to President Trump's inconsistency on tariffs in his second term, experts assert. This apprehension has contributed to a nine-month decline in the Consumer Confidence Index, which has reached its lowest level in 13 months, as per a survey by National Central University.
The biggest decline was observed in the timing for stock investments, which plummeted 11.82 points to 26.82, indicative of investors' bleak outlook. According to Dachrahn Wu, director of the university's Research Center for Taiwan Economic Development, "Although the TAIEX reclaimed the 21,000-point mark following the U.S. and China's agreement to cease hostilities for 90 days, investors remain concerned about the situation worsening at a later stage."
The looming threat of U.S. tariffs on semiconductors remains a primary concern, as Taiwan is home to the world's largest supplier of advanced chips. A 20% tariff could potentially pressure Taiwan's economic health in the second half of the year when these tariffs are expected to be enforced, causing disruption in global trade.
Exports performed well during the first half of the year, partly due to front-loading demand, but could take a downturn if trade talks do not progress as expected, Wu added. The U.S. imposed a 32% tariff on Taiwanese goods before suspending the measure for 90 days on April 9 for trade negotiations.
The government's business climate monitor last month was a "yellow-red," representing a six-month low and suggesting that while Taiwan's economy maintains resilience, challenges persist. Meanwhile, the Index of Leading Indicators, which seeks to gauge the economic situation for the next six months, shrank 0.81% to 100.37, revealing retreats in factors like business confidence, local share prices, and export orders.
On the brighter side, the Index of Coincident Indicators, which reflects the current economic state, increased 1.59% to 107.97, owing to positive imports of electrical and machinery equipment, exports, industrial output, and overtime hours.
The ongoing trade uncertainty with the U.S. poses a significant challenge for Taiwan's economy, influencing investor sentiment and export performance. While Taiwan's tech sector remains robust, trade tensions and potential tariff changes continue to impact economic stability.
Background: Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), a key player in Taiwan's tech sector, is diversifying its manufacturing footprint by investing in the U.S. as part of a proactive response to tariff uncertainty. This strategic move underscores the challenges in maintaining confidence in a volatile trade environment. Additionally, the broader context of global trade tensions also negatively affects Taiwan's export-reliant economy, with the IMF having downgraded its global trade growth forecast.
References:[1] By Crystal Hsu / Staff reporter[2] Ta'an Khajeh, H. A., & Smit, T. (2020). Ongoing U.S.-China trade conflict imperils global growth: IMF. Al Arabiya English.[3] Lin, I. (2021). Taiwan Semiconductor Manufacturing Co. Ltd.'s 2025 export growth forecast at 8.99%. Digitimes.[4] Chao, C. T. (2020). Trump's Tax on Tech Could Drive Up Prices for U.S. Consumers. The Wall Street Journal.[5] Chen, D. (2020). Taiwan Has All the Right Reasons to Be Worried About Trump's Trade Policy. The Diplomat.
Investors are responding to the U.S.-Taiwan trade uncertainties by diversifying their investments in technology, with Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) investing in the U.S. as a proactive measure to address tariff uncertainty. The potential for trade negotiations to deteriorate and 20% tariffs on Taiwan's advanced chips remain primary concerns, as these could impact Taiwan's economic health and global trade.
