The United States’ push for reciprocal tariffs presents a significant challenge to Taiwan’s economy. Jiann-Chyuan Wang, Vice President of the Chung-Hua Institution for Economic Research (CIER), indicates that this wave of tariff impacts has already caused substantial harm to Taiwan. It not only threatens to trigger an exodus of high-tech industry investment to the U.S. but also places traditional industries under the severe and simultaneous pressures of tariffs, geopolitical risks, and the dumping of excess capacity from China.
Vice President Wang emphasizes that for traditional industries, merely upgrading is insufficient. To enhance competitiveness, they must undergo a cross-domain transformation and forge links with the high-tech industrial chain. For instance, the machine tool industry can integrate with AI, semiconductors, and new energy; the petrochemical sector can incorporate ESG principles and specialty chemicals; and the textile industry can advance into functional applications. These strategies are crucial for finding growth opportunities in the new environment.
Although the semiconductor industry may receive partial tariff exemptions by investing in the U.S., this supply chain shift could crowd out domestic investment in Taiwan and weaken the overall momentum of economic growth. To alleviate this pressure, a short-term solution would be to guide a moderate adjustment of the New Taiwan Dollar exchange rate to ease pressure on exports. In the long term, however, Taiwan must promote a structural economic transformation and move away from its sole reliance on the manufacturing sector.
Vice President Wang also notes that Taiwan’s service sector, which employs a substantial portion of the workforce, should serve as a crucial pillar in structural transformation. Improvements to the tourism environment and domestic demand conditions would enhance employment quality and industrial added value, further balancing industrial development.
Taiwan’s future development requires promoting cross-sector transformation of traditional industries, leveraging high-tech advantages, and fostering service sector growth. Only through these measures can Taiwan maintain economic resilience and sustained growth amid uncertainties from tariffs and geopolitical tensions.
Author: CIER Editorial Team Date: September 18, 2025