TAIPEI (Taiwan News) — Taiwan’s economy is likely to expand 7.25% in 2025, but US tariffs and cooling AI demand will slow growth to 3.46% in 2026, the Taiwan Research Institute said Tuesday.

AI was the driving force behind Taiwan’s strong export and investment performance in 2025, the Liberty Times reported. However, demand for AI products is likely to cool in 2026, the institute said.

The impact of US tariffs is also expected to become clearer next year, while private investment is likely to post a smaller increase than in 2025. Taiwan also faces higher geopolitical risks, which, combined with weaker AI demand and a subdued global economy, could weigh on gross domestic product growth.

AI and technology will still support Taiwan’s economy in 2026, but uncertainty will increase, the institute said. With growing challenges at home and overseas, the government must be careful in designing policies that emphasize balance and resilience to achieve stable growth and long-term competitiveness.