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Poor jobs data forces Fed's hand, delayed rate cut fails to impress
Taiwan-US tariff details pending, firms remain optimistic on near-term prospects |
The U.S. economy maintained growth in the first half, driven by private consumption and AI investment. However, the Fed Chair recently noted that the labor market has noticeably cooled, with near-term inflation pressures persisting. While negative impacts from U.S. reciprocal tariffs have moderated and trade policy uncertainty has declined—supporting global manufacturing recovery—industry-specific tariffs remain partially undisclosed, and escalating geopolitical conflicts create numerous variables in the global economic outlook.
As U.S. reciprocal tariff policies gradually clarify and the New Taiwan Dollar weakened in August, impacts from tariffs and exchange rates have become less pronounced than in previous months. Manufacturing firms' sentiment regarding current-month conditions improved significantly compared to last month's survey. However, industry performance remains divergent. Driven by AI and high-performance computing demand, the electronics and machinery sector shows a notably higher proportion of firms optimistic about current-month conditions versus pessimistic ones. Meanwhile, China's production cuts and market rescue measures have pushed international steel prices higher, reducing the proportion of steel industry firms pessimistic about current-month and six-month prospects. In services, retail, and hospitality sectors benefited from summer peak season, festive consumption, and heat-avoidance opportunities, showing widespread optimism for current-month conditions. The securities sector, aided by Taiwan's stock market volume and price gains in August, saw simultaneous benefits across brokerage, proprietary trading, and underwriting businesses, with operators maintaining largely optimistic attitudes toward current-month conditions.In construction, while post-disaster reconstruction affected some public works progress, previously delayed projects
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| Trade Policy Analysis Requires Careful Examination of Underlying Assumptions |
| International trade represents a distinctive field in economics where well-trained scholars can derive virtually any desired conclusion within trade theory under reasonable assumptions. Consequently, evaluating the appropriateness of trade theories or propositions requires assessing whether discrepancies between assumptions and reality significantly alter their conclusions. In late July 2025, prominent academics and policymakers released a survey of over 200 firms, directly commenting on a hypothetical 20% US tariff on Taiwan. However, analyzing the impact of US tariffs on Taiwan requires examining not only the tax rate applied to Taiwan, but also the tariff levels imposed on competitors and the respective exchange rate levels of relevant economies. A 10% currency depreciation proves insufficient to offset a 10% tariff increase, with required depreciation rates varying across industries. Currency depreciation functions to reduce domestic production costs or value-added measured in foreign currency terms, thereby offsetting additional tariff costs. Increased tariff revenue does not constitute pure national gain, as introductory trade theory demonstrates that national benefits typically fall short of tax revenues due to domestic burden-sharing. Compelling foreign strategic partners to relocate production to the US increases production costs and potentially reduces technological advancement capabilities and economies of scale, ultimately undermining the competitive position of both the US and its partners. This may even drive downstream industries to relocate to alternative countries. The US should therefore avoid applying oversimplified theories from previous eras to contemporary challenges, as even major powers require international cooperation. Current global division of labor, while potentially suboptimal, inevitably creates losers during restructuring, generating substantial opposition to change—a phenomenon known as path dependence. Any desired transformation should adopt gradual, incremental approaches. US departure from the existing order does not imply universal acceptance of Chinese leadership in establishing new arrangements. China currently maintains policies more inequitable than those of the US, along with authoritarian governance and hegemonic ambitions. Nations lack sufficient justification to accept Chinese leadership of a global trade order potentially more inequitable than the current US-led system. |
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Taiwan Economic Research Monthly
AgTech Transformation: Innovation to Global Deployment |
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Confronting climate change, population aging, and global food supply disruptions, Taiwan's agriculture is undergoing an intelligent transformation. This month's articles examine Taiwan's agricultural transformation spanning conceptual frameworks, technological architectures, implementation cases, and international deployment, providing policymakers and stakeholders with upgrade pathways. Beginning with key concepts—"agricultural technology," "precision agriculture," "smart agriculture," and "digital transformation"—this analysis clarifies distinctions while exploring Taiwan agriculture's challenges regarding data complexity, digitalization levels, and cost-effectiveness. The report examines ICT, IoT, and AI as technological pillars, establishing layered architecture encompassing "information—analytical—execution layers," demonstrating how digital tools drive upgrading. The study presents international case studies covering image recognition, conversational AI, yield prediction, drones, and smart machinery. It analyzes contract-based "customized development advisory" models through tiered guidance, regional cooperation, and demonstration programs, enabling Taiwan's agriculture to bridge digital divides. As Taiwan's agricultural intelligence evolves toward "Technology-as-a-Service" models, this research explores emerging business paradigms, including subscription-based, platform-based, and value-added approaches, examining how technology services accelerate market alignment. The analysis encompasses global agricultural technology investment dynamics and agri-food patent landscapes, evaluating export strategies for Taiwan's technology sector. Finally, referencing Nuffield International's mechanisms, the study explores how Taiwan's agriculture can capture global trends and exert strategic influence, providing frameworks for innovation and transformation.
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