Evidence that an economy can prosper despite ongoing military threats from a formidable neighbor and the imposition of extensive global tariffs by US President Donald Trump can be found in Taiwan. The self-ruled democracy has recorded approximately 8% economic growth over two consecutive quarters, a notable accomplishment for a developed economy. This trend is anticipated to elevate its 2025 GDP growth to nearly 7.4%, potentially exceeding that of China. “Taiwan’s economy has clearly been one of the best performing economies in the world, particularly over recent quarters,” stated Jason Tuvey. “Many individuals anticipated that Taiwan’s economy would gain from the AI boom, yet perhaps many underestimated the extent of this impact.” Taiwan’s statistics bureau on Friday reported a year-on-year GDP growth of 8.21% in the third quarter, propelled by a remarkable 36.5% increase in exports for the period ending September. This came after a notable 7.7% growth in the second quarter. In October, exports reached an unprecedented peak, rising 49.7% compared to the same month last year – marking the most significant monthly increase in over 15 years. In a noteworthy development, Taiwan’s stock market surpassed Germany’s in September, positioning itself as the world’s eighth largest, fueled by the global enthusiasm for artificial intelligence.
Despite the flourishing of Taiwan’s economy, propelled by the significant impact of its high-tech sector, particularly the leading chipmaker, many citizens find themselves excluded from this economic boom, as income disparities increase and wages stagnate. A primary reason cited by economists is the significant concentration of gains. According to the sources, electronics manufacturing contributes over 15% to GDP while employing merely 6.5% of the workforce. This disparity is partially evidenced by lackluster consumer expenditure. The index released by the Research Center of Taiwan Economic Development indicates that consumer confidence has remained subdued throughout the year. According to economists, Trump’s trade war has negatively affected sentiment, especially given that Taiwan has not yet concluded a trade agreement with Washington. “From my perspective as a salaried worker earning above the median income, I feel the economy isn’t actually doing that well,” stated Vivian Chen. Chen’s observations resonate with numerous stakeholders in the epicenter of the global semiconductor industry. Taiwan’s GDP per capita is projected to surpass $38,000 this year, outstripping both South Korea and Japan. However, its average wage falls short of both countries by a minimum of 30%, based on analysis of official data.
Taiwan’s technological capabilities, developed over many years in the semiconductor and electronics sectors, have strategically positioned the island to capitalize on the burgeoning AI market. As technology leaders such as Google, OpenAI, and Microsoft accelerate their efforts to establish data centers utilizing graphics processing units developed by Nvidia and AMD, Taiwanese firms have emerged as key players, producing the semiconductors and servers critical for the training of AI models. In a notable instance, TSMC, the largest contract chipmaker globally, which supplies Nvidia and is referred to locally as the “protector of the nation,” has elevated its full-year revenue growth forecast to the mid-30% range, propelled by the remarkable expansion in AI, following its outperformance in sales expectations in prior quarters. In the first ten months of this year, Taiwan’s exports to the United States, which has seen significant AI data center expansions, have increased by over 63%, as reported by Taiwan’s Ministry of Finance. However, inquiries have intensified regarding the viability of this export-led expansion, particularly in light of apprehensions that the enthusiasm surrounding AI may wane. Taiwan’s export growth “will definitely come down next year,” stated Wang Jiann-Chyuan. He anticipates that growth will decline from approximately 30% in recent quarters to single digits, as the surge this year complicates the prospects for further expansion.
Wang noted that Trump’s actions contribute to the prevailing uncertainty. Taiwan’s trade surplus with the US reached an unprecedented level this year, heightening the likelihood of examination from a president who has prioritized the reduction of trade deficits as a key objective of his tariff strategy. Chips and electronics, constituting over 73% of Taiwan’s exports, have thus far been exempt from the levy. Trump has consistently threatened to impose triple-digit tariffs on semiconductors; however, he has granted exemptions to companies such as TSMC that establish manufacturing facilities within the United States. Nonetheless, the significant concentration of exports within the high-tech sector has heightened apprehensions regarding dependence on a singular industry — or potentially a sole company. Chips and electronics currently represent almost 75% of exports, an increase from approximately 50% five years prior, while traditional sectors like metals, machinery, and plastics have experienced minimal growth or even a decline. For Wu Jieh-min, a researcher at Taiwan’s top research institute Academia Sinica, part of the concern regarding the island’s economic future is linked to the profound insecurity many Taiwanese people feel about its political status. China asserts that Taiwan is an integral part of its territory, despite a lack of historical control, and has committed to the potential use of force to achieve its unification. “The cautious, on-edge mindset observed across Taiwanese society is quite evident, and I perceive it as a positive development,” stated Wu, whose research centers on political economy and sociology. “We must navigate our own future with great caution, as even mere survival presents significant challenges for us,” he stated.
On the ground, some Taiwanese express that the optimistic headline figures do not accurately represent their daily experiences, as illustrated by Chen, the nurse, who remarked that salaries for health professionals appear to be stagnant. “That’s why you hear doctors expressing concerns about inadequate compensation, and why a significant number of nurses are exiting the country or the profession entirely,” Chen stated. Individuals in Taiwan often engage in self-promotion, frequently asserting, ‘We have TSMC,’ or taking pride in the elevated status of the stock market. However, for numerous individuals residing in this area, their monthly earnings have remained relatively unchanged,” she added. GT Lin expressed a similar viewpoint. “That’s why I’ve come to the conclusion that the country is strong, but the people aren’t necessarily wealthy,” he stated. Taiwan’s real wage growth, when adjusted for inflation, started to decelerate in the late 1990s and has experienced stagnation since the early 2000s. Labor’s share of GDP reached its zenith at approximately 50% during the 1990s and has subsequently declined to roughly 44%. Roy Ngerng, a Singaporean labor activist residing in Taipei, has extensively analyzed the issue of wage stagnation in Taiwan, attributing it to prolonged wage suppression strategies designed to enhance export competitiveness. He noted that although Taiwan’s economy has experienced remarkable growth in recent years, accompanied by soaring profits in the technology sector, the average worker and employees in other industries have largely been excluded from these gains, exacerbating income inequality.
Five years prior, wages within the electronics sector were reported to be 35% higher than the average across the entire economy, as noted by Capital Economics. Currently, they have increased by over 70%. Ngerng noted that the current administration has been consistently raising the minimum wage. Wu Tsong-Min, an economist at National Taiwan University, observes that wage stagnation is “not unique to Taiwan,” as numerous advanced economies encounter comparable challenges, especially among low-skill workers. Wu, the author of “A 400-Year History of Taiwan’s Economy,” also noted that Taiwan’s GDP per capita, when adjusted for purchasing power, increases further due to lower domestic prices. Housing continues to pose a significant challenge: Taipei’s house price-to-income ratio has nearly tripled over the last twenty years, exceeding those of London, New York, and even Hong Kong, as reported by the Global Property Guide. Wu of Academia Sinica expresses optimism, noting that the flourishing tech industry has the potential to create spillover effects that benefit other sectors. “Taiwan’s economy wasn’t shaped by deliberate planning or an exceptionally capable government, but rather an evolutionary process,” he stated. “Although Taiwan’s economy is significantly smaller than those of the leading global powers, its small and medium-sized enterprises exhibit agility, adaptability, and a keen awareness of global trends. That is how its semiconductor industry evolved into its current state.”