TAIPEI (Taiwan News) — The New Taiwan dollar’s rapid appreciation against the US dollar, fueled by speculation surrounding tariff negotiations, presents both challenges and benefits for Taiwan’s economy.
The New Taiwan dollar broke the NT$30 per US dollar mark on Monday, triggering a surge in currency exchanges that overwhelmed bank apps and online systems. Democratic Progressive Party (DPP) Legislator Kuo Kuo-wen (郭國文) cited the Central Bank on Facebook, saying the appreciation was due in part to anticipated pressure from former US President Donald Trump to strengthen foreign currencies to narrow the US trade deficit, per SET News.
Taiwan recorded a trade surplus of US$73.92 billion with the US in 2024, a 54.6% increase from the previous year, according to Taiwan Today. From the US perspective, this sizable trade gap was the basis for Trump’s April 2 proposal to impose a 34% tariff on Taiwanese goods.
Investors now expect that as part of a possible concession to avoid those tariffs, Taiwan may allow the New Taiwan dollar to continue strengthening. Additional support for the currency has come from strong GDP data and rising foreign investment in Taiwan’s stock market, per Forexlive.
According to Horizon Securities, the rapid appreciation of the Taiwan dollar poses a significant challenge to traditional industries that are still recovering, per NOWnews. However, the firm noted that a strong currency also reduces import costs and helps curb inflation.
It added that if productivity improves and long-term technological upgrades continue, industries such as textiles, garments, and machine tools may be able to offset the negative effects of a strong currency by boosting profit margins.
While a stronger Taiwan dollar generally hurts exporters, it benefits companies reliant on foreign procurement by lowering costs. For example, fuel costs account for 30% to 40% of operating expenses for airlines.
EVA Air previously estimated that a 1% appreciation in the Taiwan dollar could reduce its annual expenses by NT$200 million to NT$300 million. Meanwhile, CPC Corporation cut gasoline and diesel prices by NT$1.1 and NT$1.4 per liter, respectively, early Monday, citing falling global oil prices and the strengthening Taiwan dollar.
The new price for 95-octane unleaded gasoline is NT$28.7 per liter.
Meanwhile, Taiwan Semiconductor Manufacturing Co. (TSMC) has taken steps to hedge against foreign exchange risk. Last year, it made two overseas investments totaling US$8 billion, and this year, its board approved capital increases of up to US$10 billion for overseas subsidiaries to reduce currency hedging costs.
Some supply chain sources suggest that the stronger Taiwan dollar may not be entirely negative in the short term, particularly in light of TSMC’s recent US$100 billion investment announcement in the US.
