The island of 23 million people is a powerhouse in the semiconductor industry, with nearly all of the world’s most advanced chips made there.
Soaring demand for AI-related chips in recent years has fuelled Taiwan’s trade surplus with the US – and put it in the cross-hairs of US President Donald Trump and his far-reaching tariffs.
Gross domestic product expanded 5.4% on-year in Q1, the fastest pace in a year, the government’s statistics agency said in a statement, beating a Bloomberg News estimate of 3.6% and fourth-quarter growth of 2.9%.
“Demand for AI and emerging technology applications remains strong, supply bottlenecks for high-end information and communications technology (ICT) products are gradually easing, and customers are front-loading inventory in response to US tariff measures,” the statement said.
Taiwan was hit with a 32% levy on its shipments to the US on April 2 when Trump announced hefty tariffs against many US trading partners.
The tolls were suspended for 90 days after trillions of dollars were wiped off world markets, but a 10% blanket tariff remains in place.
Taiwan’s negotiating team has held talks with the Trump administration to reduce the levy.
Its trade surplus with the US is the seventh highest of any country, reaching US$73.9 billion in 2024.
Around 60% of its exports to the US are ICT products, including semiconductors.
Taiwan also exports bicycles, auto parts and machine tools.
The cabinet last week announced a planned special budget of up to NT$410 billion (US$12.8 billion) to shield the economy against the impact of the new US tariff.
London-based Capital Economics senior Asia economist Gareth Leather raised his full-year growth forecast to 5.4% from 3.9% following the latest data.
“Although Trump’s tariffs pose a downside threat to the economy, we expect growth to remain strong, helped by continued rapid growth in ICT exports,” Leather said in a note.
Taiwan had sought to avoid Trump’s threatened levy by pledging increased investment in the US, more purchases of US energy and greater defence spending.
Chips were excluded from the tariffs, but an ongoing US “national security” probe into the sector could pave the way for a levy.
However, Leather said tariffs on Taiwanese chips would not have a big impact on the island’s economy, given its dominance in the sector.
“It accounts for around 60% of global production and over 90% of the most advanced chips – importers would have little alternative to paying extra,” Leather said.