Growing like ‘gangbusters’: Can Taiwan maintain its economic momentum? | Business and Economy News
Taiwan Sees Economic Surge Amid AI Boom
Taiwan has emerged as one of the year’s notable economic success stories, experiencing a significant upswing largely driven by demand for artificial intelligence (AI). In recent months, Taiwan’s stock exchange has risen to become the fifth largest globally by market capitalization, surpassing those of the United Kingdom, Canada, and India.
The growth trajectory has been fueled by a surge in technology exports, particularly sought after by the United States. In 2022, U.S. imports from Taiwan reached $201 billion, nearly doubling from $116 billion in 2024. By May, Taiwan had surpassed China, becoming the third-largest source of U.S. imports, following Mexico and Canada.
Experts attribute this market acceleration to Taiwan’s robust technology sector, describing it as a revival of the island’s “tiger economy” status, which symbolizes rapid economic growth in East Asia. Chad Bown, a senior fellow at the Peterson Institute for International Economics, noted that AI significantly enhances Taiwan’s economic importance.
However, some critics caution that despite the current strength of Taiwan’s market, challenges such as geopolitical tensions and demographic issues may hinder its long-term economic prospects. Reza Hasmath, a faculty advisor at The China Institute at the University of Alberta, expressed concern about sustainability, stating, “It seems to be a win-win for now, but Taiwan is just postponing a reality that’s not sustainable.”
Economic Growth Continues
Taiwan’s export-driven economy contributed to an impressive gross domestic product (GDP) growth of 8.63 percent in 2025 and maintained this momentum into the first quarter of this year with a remarkable 13.69 percent increase. Government data released on Friday revealed that the economy grew 12.92 percent in the second quarter, which ended in June.
“This GDP growth is tremendous,” said Dexter Tiff Roberts, a nonresident senior fellow at the Atlantic Council’s Global China Hub. He believes this trend will be long-lasting, particularly as Taiwan produces approximately 90 percent of the advanced chips used in leading AI models, which remain in high demand.
The AI boom is a global phenomenon, but the U.S. has become a focal market for these chips, with billions of dollars being invested annually. U.S. President Donald Trump has pledged to strengthen the nation’s position as a leader in artificial intelligence, claiming his administration has attracted over $2.7 trillion in tech and AI investments during his second term.
To secure access to Taiwan’s semiconductor technology, the Trump administration established an agreement that includes a $500 billion investment from Taiwan into the U.S. This investment is anticipated to come from Taiwanese semiconductor and tech companies, primarily through the development of domestic manufacturing. Additionally, Taiwanese firms will be permitted to import 2.5 times the capacity of their U.S. factories without facing significant tariffs. In a related trade agreement, Taiwan committed to reducing tariffs on 99 percent of U.S. exports.
Concerns Over Trade Dynamics
Despite Taiwan’s current economic success, Hasmath warns of potential challenges in U.S.-Taiwan relations. Trump has aimed to eliminate trade deficits with American allies and has criticized nations exporting more to the U.S. than they import. Taiwan’s increasing trade surplus with the U.S., which is approaching $200 billion, could trigger a backlash.
“This is an unbalanced relationship that is not conducive to Taiwan in the long term,” Hasmath stated, suggesting that Trump may look to renegotiate trade agreements with Taipei.
Roberts echoes concerns about the unpredictable nature of U.S. leadership, noting that Trump’s low approval ratings and constitutional constraints on his presidency could lead to uncertainties in Taiwan’s economic future.
Demographic Challenges Ahead
While Taiwan’s economic growth is evident, Roberts points to vulnerabilities at home. Traditional export sectors, such as plastics and textiles, are underperforming, and only a small segment of the Taiwanese workforce is involved in the AI sector.
“A majority of the younger population is not in high tech, so that’s a real problem,” he said. Despite a rising stock market leading to a perceived wealth effect, this does not translate into broad economic benefits for all Taiwanese citizens.
Economists warn of a potential K-shaped economy in Taiwan, where the wealthy thrive while lower-income sectors stagnate. The semiconductor industry employs a maximum of 350,000 people, and Taiwan Semiconductor Manufacturing Company (TSMC), the largest chip company in the region, makes up a significant portion of the national stock market and GDP growth.
Additionally, Taiwan faces demographic challenges, with about 20 percent of its population over the age of 65.
Import reliance poses further vulnerabilities, especially in energy, as Taiwan imports most of its oil and struggles with water scarcity. The looming presence of China adds another layer of complexity, as Beijing views Taiwan as a part of its territory and has actively tried to limit Taiwan’s international recognition. Chinese officials have warned that Taiwan’s growing ties with the U.S. tech sector could undermine its economic interests.
If the AI boom does not yield sustainable results for Taiwan, Hasmath predicts it could lead to significant political shifts within the island’s government.
