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The Taiwanese Economy in March 2025
With the Trump administration's series of tariff policy adjustments promoting American manufacturing, global trade friction has intensified. Meanwhile, the widening performance gap between the US and other economies may exacerbate monetary policy divergence among major central banks. As the world's largest economy, changes in US policies will influence global economic and trade trends, leading international forecasting institutions to significantly downgrade growth projections for major economies in 2025.
Domestically, benefiting from strong AI demand and customers' early procurement in response to US tariff variables, March manufacturing exports, production, and export orders all showed significant growth compared to the previous month, driving a notable increase in the proportion of manufacturers with positive economic outlooks. However, fluctuating US tariff policies and unclear progress in negotiations between countries have added uncertainty to the global economy, causing a significant rise in the percentage of manufacturers with negative outlook for the coming six months. The service sector has also been affected by potential impacts of Trump's policies on domestic industries and weakening downstream demand, coupled with lackluster financial market performance, making retail and financial service providers more conservative about the economic outlook for the next six months. Although the construction industry has benefited from the timely progress of some major public works projects such as water conservancy and transportation infrastructure, housing market transaction volume is likely to decline due to selective credit controls, poor stock market performance, and diminishing effects of new youth housing loans. Meanwhile, economic uncertainties brought by Trump's tariff policies may suppress end-user demand and slow down industrial expansion, further depressing demand in the industrial real estate market. According to our institute's business survey results, after model calculations, the composite indicators for manufacturing, service, and construction industries continued to decline in March, with the largest monthly drop in recent years, indicating that manufacturers hold cautious or even pessimistic attitudes toward future economic outlooks.
In this update of the macroeconomic forecast, although private consumption and investment momentum remain supportive, rising geopolitical risks and intensifying trade frictions have led to increased volatility in global financial markets. Corporate capital expenditure has become more hesitant, and public consumption willingness has cooled, resulting in domestic demand performing below initial expectations. The first quarter benefited from strong demand for AI and other emerging technology applications, as well as businesses building inventory in advance to respond to US tariff increases, leading to impressive performance in imports and exports, manufacturing production, and export orders. However, frequent changes in US tariff policies have increased uncertainty, causing international institutions to lower their 2025 global economic growth forecasts. Moreover, the early procurement effect is diminishing, and external demand may significantly weaken in the second half of the year. Considering these factors, this forecast revises downward private investment and consumption performance. Taiwan's 2025 economic growth will show a pattern of "higher in the first half, lower in the second half." TIER estimates that the annual economic growth rate for 2025 will be 2.91%, revised downward by 0.51 percentage points from the January forecast.
In foreign trade, benefiting from continued strong business opportunities in artificial intelligence and emerging applications, as well as client-side early procurement in response to US tariff policy variables, imports and exports continued to show double-digit year-on-year growth. However, with the Chinese New Year base period effect fading, March's export growth rate shrank from the previous month's 31.44% to 18.59%, while the import growth rate decreased from 47.46% to 28.77%. Regarding major export products, as artificial intelligence technology and related applications accelerated their deployment and continued to penetrate terminal electronic products, combined with clients' early procurement, information and communication and audio-visual products maintained high year-on-year growth rates, while electronic components maintained stable growth, though year-on-year growth rates declined under a high base period. Other traditional product categories were affected by market overcapacity and intensified competition, with minerals, machinery, basic metals, and metal products all showing significantly lower year-on-year growth rates.
In terms of domestic production, benefiting from continued strong demand for artificial intelligence, high-performance computing, and cloud data services, the information and electronics industry's production momentum continued to increase. However, some traditional industries still experienced production decreases due to market competition and conservative demand, offsetting some of the gains. The March manufacturing production index was 106.89, an increase of 14.91% from the previous month and 14.71% compared to the same month last year.
For domestic consumption, retail sale in non-specialized stores increased by 4.26% year-on-year in March. Supermarkets benefited from continued expansion and diverse promotional activities, growing by 8.90% year-on-year, while hypermarkets saw a 10.97% year-on-year increase due to strong sales of exclusive products and renovated store benefits. In the food and beverage service sector, March food and beverage service revenue reached NT$85.5 billion, a year-on-year increase of 2.84%, with restaurants and beverage shops benefiting from new brands and store expansion, co-branded new products, and promotional activities. Event catering and other food service activities saw increased demand due to growth in flight passenger numbers and airline meal needs. The food and beverage service sector’s revenue for the first quarter increased by 3.73% compared to the same period last year.
Regarding prices, fruit prices were affected by previous typhoons and heavy rain, driving up food category price growth rates. The year-on-year increase in food prices expanded from 4.04% in February to 4.90% in March, contributing 1.32 percentage points to the overall index, an increase of 0.25 percentage points from the previous month. The overall CPI year-on-year growth rate increased from 1.58% in February to 2.29% in March, while the core CPI year-on-year growth rate also expanded from 0.98% in February to 1.63%. For PPI, despite increases in agricultural product and gas prices, the overall manufacturing price growth rate declined, offsetting some increases. As a result, the overall PPI year-on-year growth rate slightly decreased from 3.69% in February to 3.53% in March 2025. Cumulatively, the CPI year-on-year growth rate for the first quarter of 2025 was 2.18%, and the PPI year-on-year growth rate was 3.69%.
In the domestic financial market, the funding environment remained stable. In March 2025, the highest financial industry overnight call loan rate was 0.826%, the lowest was 0.815%, and the weighted average rate was 0.821%, up 0.001 percentage points from the previous month and 0.081 percentage points from the same month in 2024. In the stock market, with the Trump administration announcing increased tariffs on automobiles, trade uncertainty further escalated, with investors watching for details of the April 2nd reciprocal tariffs, making the market atmosphere more conservative. At the same time, concerns about a possible US economic recession intensified, and the ongoing issue of TSMC's expanded investment in the US continued to ferment, leading to weak performance in both Taiwan and US stocks. The Taiwan Weighted Index closed at 20,695.90 points at the end of March, a significant drop of 10.23%, with an average daily trading volume of NT$338.652 billion. Regarding exchange rates, global financial markets were highly focused on the series of reciprocal tariff measures expected to be introduced by the Trump administration in early April. Due to trade policy uncertainties, foreign investors continued to net sell Taiwan stocks and transfer funds overseas, causing the New Taiwan Dollar to continue weakening. The exchange rate closed at 33.182 to the US dollar at the end of March, a depreciation of 1.09%.
Business Survey Outcomes
The proportion of manufacturing firms that perceived their business as better than expected in March was 34.0%, an increase of 4.5 percentage points compared to 29.5% in the previous month. On the other hand, the proportion of those who perceived their business as worsening in the target month was 21.7%, a decrease of 2.2 percentage points compared to the 23.9% reported in the previous month. Additionally, the proportion of manufacturing firms that perceived their business as remaining constant in the target month was 44.3%, edging down 2.4 percentage points compared to the 46.7% recorded in the previous month.
Furthermore, in the target month, the segment of manufacturers who anticipated an improvement in their business over the next six months stood at 19.7%, representing a sharp decline of 15.4 percentage points compared to the 35.1% recorded in February. Conversely, the proportion of firms foreseeing a deteriorating economic outlook was 29.8%, marking a surge of 17.2 percentage points from the 12.6% reported one month earlier. Meanwhile, 50.5% of manufacturing firms perceived their business outlook as remaining constant over the next six months, a decrease from 52.3% in the previous month. Overall, manufacturers hold a pessimistic view of the future economic outlook.
The TIER Manufacturing Composite Indicator for the target month in 2025, adjusted for seasonal factors, experienced a corrective decline. The index reached 95.00 points in March 2025, marginally declining 2.71 points from 97.71, reflecting weakening sentiment among manufacturers.
In addition, the TIER Service Sector Composite Indicator for the target month in 2025 exhibited a downward trajectory. It declined from a revised 93.01 points in February 2025 to 88.51 points—a drop of 4.50 points, marking three consecutive months of decline.
Lastly, the TIER Construction Sector Composite Indicator for March 2025, also adjusted for seasonal factors, stood at 94.34 points, down 7.53 points from 101.87 in the previous month, reflecting a return to a downward trend.
Analyses and Outlook of Industries
Following are manufacturers' sentiments that are industry-specific in the monthly TIER surveys:
Manufacturers’ sentiments that have been in decline in the March survey and are expected to deteriorate over the next six months include:
Textiles Mills, Yarn Spinning Mills, Man-made Fibers Manufacturing, Cutlery and Tools Manufacturing, Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing, Motorcycles Manufacturing, Construction, Real Estate Investment, Securities.
Manufacturers’ sentiments that have been in decline in the March survey, but are expected to improve over the next six months include:
None.
Manufacturers’ sentiments that have been in decline in the March survey and are expected to remain sluggish over the next six months include:
None.
Manufacturers surveyed who felt the March outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Fabric Mills, Apparel, Clothing Accessories and Other Textile Product Manufacturing, Leather, Fur and Allied Product Manufacturing, Paper Manufacturing, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Motor Parts Manufacturing, Bicycles Manufacturing, Wholesale.
Manufacturers surveyed who felt the March outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Soft Drink Manufacturing.
Manufacturers surveyed who felt the March outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Wood and Bamboo Products Manufacturing, Petroleum and Coal Products Manufacturing, Iron and Steel Basic Industries, Metal Structure and Architectural Components Manufacturing, Motorcycles Parts Manufacturing, Basic Civil Structure Construction, Retail Sales, Telecommunication Services.
Manufacturers’ sentiments that have improved in the March survey and is expected to deteriorate over the next six months include:
Chemical Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Industrial Machinery, Bicycles Parts Manufacturing, Insurance.
Manufacturers’ sentiments that have improved in the March survey and is expected to remain upbeat over the next six months include:
Electrical Machinery, Supplies Manufacturing and Repairing, Electronic Machinery.
Manufacturers’ sentiments that have improved in the March survey and the trend is expected to continue for the next six months include:
Food, Slaughtering, Frozen Food Manufacturing, Edible Oil Manufacturing, Flour Milling and Grain Husking, Prepared Animal Feeds Manufacturing, Printing, Industrial Chemicals, Petrochemicals Manufacturing, Plastics and Rubber Raw Materials, Rubber Products Manufacturing, Plastic Products Manufacturing, Non-metallic Mineral Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Glass and Glass Products Manufacturing, Cement and Cement Products Manufacturing, Electrical Machinery, Electric Wires and Cables Manufacturing, Electrical Appliances and Housewares Manufacturing, Communications Equipment and Apparatus Manufacturing, Audio and Video Electronic Products Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Electronic Parts and Components Manufacturing, Precision Instruments Manufacturing, Education and Entertainment Articles Manufacturing, Restaurants and Hotels, Banks, Transportation and Storage.
Taiwan- Data and Forecast (25th April 2025.)
(NT$100 million, 2016=100), %
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