TAIPEI (Taiwan News) — Fitch Ratings has revised Taiwan’s banking sector outlook to “neutral” from “deteriorating,” citing reduced macroeconomic uncertainty following a recent US–Taiwan tariff agreement.
The US-based credit rating agency said the lowering of US-Taiwan tariffs from 20% to 15% on Jan. 15 will ease pressure on loan quality and help stabilize banks’ financial performance this year. Risks to Taiwan’s GDP growth linked to potential US tariffs have subsided, offering relief to Taiwan’s export-oriented economy, according to a press release on Wednesday.
Fitch said more stable economic conditions are expected to strengthen the operating environment for Taiwanese banks, with asset quality and profitability likely to be stronger than previously forecast. It now expects the sector’s impaired loan ratio to remain below 1% in 2026, estimating 0.7% to 0.8% in 2025, compared with a prior forecast of 1.2%, as loan pressures from export sectors ease.
The sector’s operating profit to risk-weighted-assets ratio is projected to hold at around 1.5% in 2026, up from a previous estimate of 1.2%, supported by stronger lending income, higher fee generation, and lower credit costs.
Fitch also raised its loan growth forecast for 2026 to the high single digits, from about 5% previously, driven by increased overseas investment and stronger corporate credit demand. Improved market sentiment is expected to support wealth management fees and overall sector profitability.
In a separate report released Tuesday, Fitch said the US–Taiwan tariff agreement provides near-term relief for Taiwan’s semiconductor-driven export economy while underscoring Taiwan’s exposure to risks from global supply chain shifts and external policy changes.
Under the agreement and Taiwan’s existing “most favored nation” status at the World Trade Organization, Taiwanese exports will be aligned with the rates applied to South Korea and Japan. Exports to the US remain significant, accounting for about 33% of Taiwan’s merchandise exports and 22% of GDP in 2025, with machinery and electrical equipment, including semiconductors, comprising 88% of those exports, Fitch said.
In the near term, the agency expects some Taiwanese firms to shift operations back to Taiwan from China, alongside increased investment in the US. Over the longer term, however, relocation of high-end manufacturing to the US could pose strategic risks to Taiwan’s competitive edge in advanced semiconductors, Fitch said.
