Taiwan's Economy Booms with AI and Rush Orders Amidst Tariff Uncertainty
- Written by Chen Cheng-hui, Staff Reporter
Industrious activity demonstrates significant energy usage: institution findings
Last month, Taiwan's economic landscape shimmered brightly under the influence of inventory stockpiling and rush orders, thanks to the US government's new tariffs. A study conducted by the Taiwan Research Institute (TRI) reveals this lively economic environment, as electricity consumption increased for the 11th consecutive month.
The TRI's Electricity Prosperity Index (EPI) registered a 0.15 percent growth compared to the previous year, painting a "yellow-red" picture of economic health. This surge is a testament to Taiwan's resilient economy, which has weathered the storm of US tariffs impressively.
Since President Donald Trump took office, he's announced a barrage of tariffs, including "reciprocal" duties on major trading partners. As global companies prepare for these impending tolls, they've stepped up their efforts to restock inventories and expedite shipping. According to the TRI, this phenomenon has positively impacted industries such as semiconductors and electronics, pushing production lines to maximum capacity and driving the nation's economic growth.
Based on the TRI's projections, Taiwan's economy likely expanded by 3 percent year-over-year in March and 3.1 percent in Q1. The institute relies on the EPI to monitor the health of the manufacturing and service sectors.
Looking at the numbers, overall high-voltage power consumption surged 1.49 percent year-on-year, with the manufacturing sector driving most of the growth (up 1.69 percent), while the service sector saw a more modest gain (0.37 percent). The manufacturers' boom can be attributed to the groundswell of artificial intelligence (AI) development and the surge in orders since early March. Meanwhile, the service sector's uptick might be linked to the burgeoning AI server market, which has sparked increased demand for computers, electronic goods, and optical products.
However, not all sectors are thriving. The chemical material sector has grappled with stiff competition from foreign rivals and global overcapacity, resulting in a 3.22 percent decrease in power consumption. Furthermore, the US tariffs have taken a toll on suppliers of steel products, as they contend with pricing pressures from Chinese and Southeast Asian competitors. Their electricity use declined 8 percent compared to the same period last year.
The recent rush orders underscore Taiwan's crucial role in the global technology supply chain. On the flip side, they reveal the risks associated with the unpredictable nature of US tariff policy, which necessitate careful observation in the months ahead.
Deeper Insights
The US tariffs have had mixed effects on Taiwan's economy. While they've prompted short-term manufacturing expansion, they've also introduced uncertainty into supply chains. This instability can affect production and power usage in the long run. Taiwan's high-tech sector's growth, fueled by AI, leads to substantial energy demands, which can put pressure on its energy security, given the country's heavy reliance on imported energy. The government has committed to diversifying into renewable energy, though progress remains slow.
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[2] Focus Taiwan News Channel. (2021, April 22). US tariffs spur Taiwan manufacturing growth, but risks remain: Instit. Retrieved April 25, 2022, from https://focustaiwan.tw/politics/202104220031
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[4] Taiwan News. (2021, March 26). Taiwan to develop 3.7GW offshore wind farm with UK's Orsted. Retrieved April 25, 2022, from https://www.taiwannews.com.tw/en/news/4174952
- Amidst tariff uncertainty, the Taiwan Research Institute (TRI) reports a surge in power consumption due to inventory replenishment demand, with the manufacturing sector spearheading the growth, notably driven by artificial intelligence (AI) development and rush orders.
- The TRI's Electricity Prosperity Index (EPI) revealed a 0.15% growth compared to the previous year, indicating Taiwan's resilient economy despite US tariffs, but also highlighting the risks associated with the unpredictable nature of US tariff policy.
- While tariffs have spurred short-term manufacturing expansion, they have also introduced supply chain instability, affecting the long-term production and power usage. Furthermore, Taiwan's high-tech sector's growth, fueled by AI, has resulted in substantial energy demands, potentially impacting the country's energy security given its heavy reliance on imported energy.
- In an effort to address these challenges, the government is committed to diversifying into renewable energy sources, particularly through offshore wind farm development with international partners such as the UK's Orsted.
