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U.S. confronts multifaceted risks from tariff volatility, employment deceleration, and inflationary pressures
Taiwan-U.S. trade framework nears resolution, corporate outlook improves as uncertainty diminishes |
Despite resilient global Q2 growth and trade data, frequent U.S. tariff adjustments have caused significant distortions. Asian economies saw output surges from early client stockpiling, but this demand front-loading means greater correction pressures ahead, raising future downside risks.
Domestic industries show mixed performance. AI demand growth and the approaching U.S. tariff deadline drove client stockpiling, boosting July electronics orders and ICT exports. More electronics and machinery firms turned optimistic about current conditions. However, potential U.S. semiconductor tariffs reduced industry optimism for the next six months. Non-semiconductor traditional goods remain weak, with manufacturers staying conservative on current and future outlook. In services, Taiwan's stock recovery boosted investment confidence, with securities firms optimistic about July. But banks faced profit compression from weak property markets and lower provisioning and FX revenues, while insurers dealt with higher hedging costs. Both sectors remain conservative and increasingly pessimistic.
Construction turned recessionary in July as post-disaster rebuilding scattered labor and typhoons disrupted southern work sites. While public projects provide support, weak residential markets will limit growth. Real estate saw July housing deliveries boost monthly transactions in six major cities, though annual declines remained large. Property markets stay weak, and high supply levels may worsen residential supply-demand imbalances over six months.
According to our institute's survey results and model calculations, July manufacturing composite indicators ended five consecutive months of decline and turned upward, while service and construction composite indicators resumed downward trends after brief one-month recoveries. ...Read more |
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| The US Should Target Unfair Policies, Not Trade Deficits |
| The US has long been dissatisfied with its trade deficits and unfair foreign policies. President Trump announced reciprocal tariffs to counter unfair policies against America. However, trade deficits have many causes. Some argue America's deficit stems from domestic factors, while others view it as beneficial—the US exchanges self-issued dollars for foreign goods. Theoretical and practical views on trade imbalances vary significantly and merit careful discussion. For most countries, deficits may cause financial tightening and payment difficulties. Trade surpluses increase money supply and boost economic prosperity, provided they don't become excessive and trigger inflation. Thus surpluses appear preferable to deficits, explaining why many countries have long favored surpluses like misers hoarding wealth. Countries with limited foreign reserves reasonably dislike deficits. America differs fundamentally. Since the dollar serves as most countries' reserve currency and the US can issue dollars and create dollar deposits, its monetary supply and foreign payment capacity remain unaffected by deficits. America doesn't face the currency shortage and economic contraction that deficits typically cause other nations. The dollar's special status means America needn't fear trade deficits like other countries. Instead, America benefits from deficits by obtaining foreign goods cheaply while reinforcing the dollar's international dominance. Developing countries' surpluses represent underutilized resources for economic development. Trade surpluses mean they exchange production and income for foreign currency and overseas assets rather than investing domestically to enhance future productivity and national income—potentially a loss. Unfair policies that capture foreign product markets are the main harm to deficit countries. Deficits themselves aren't necessarily detrimental to America. The real damage comes from policies violating free and fair competition that cause or worsen America's deficit or reduce its surplus. If America targets deficits for foreign sanctions, it may not punish the actual wrongdoers. Hopefully President Trump and the US government will grasp this correct direction. |
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Taiwan Economic Research Monthly
Global Perspectives on AI Development Trends and Taiwan's Development Opportunities |
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In recent years, key technologies including sovereign AI, humanoid robots, and AI language models have achieved breakthrough innovations, becoming core drivers of global industrial transformation. Countries worldwide are strengthening AI technology autonomy and developing resilient governance systems to ensure competitive advantages and economic security. Examining major countries' AI policies: The U.S. views AI as a crucial geopolitical tool, using export controls to restrict China's access to advanced AI chips, and maintaining American leadership. The EU implemented the AI Act in 2024 and released the GPAI Code of Practice in July 2025, emphasizing innovation and ethical safety. South Korea and Japan are building AI infrastructure, developing native language models, and promoting applications in manufacturing, transportation, and healthcare. China positions "new quality productive forces" as its centerpiece, viewing AI as the core engine for industrial upgrading. As a global semiconductor hub, Taiwan possesses competitive advantages in AI chip manufacturing, edge computing modules, and server contract manufacturing. Facing international technological competition and supply chain challenges, Taiwan should strengthen autonomous AI development from a strategic perspective. This issue analyzes AI strategic deployments in the U.S., EU, Japan, and South Korea, covering sovereign AI development, generative AI applications, and policy evolution. It explores how Taiwan can leverage technological advantages, strengthen its domestic AI ecosystem, and advance autonomous development strategies.
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