Taiwan’s economy grows 8.6% in 2025, fastest rate in 15 years, turbocharged by the AI boom

Taiwan’s economy surged at an 8.6% annual rate in 2024, marking its fastest expansion in 15 years, powered by artificial intelligence demand and robust exports to the United States, according to data released Friday by the island’s statistics agency.

The growth figure significantly exceeded economists’ forecasts and represents Taiwan’s strongest economic performance since 2010, highlighting the island’s critical position in global technology supply chains.

Earlier this month, Taiwan secured a favorable trade agreement with the Trump administration that reduced U.S. tariffs on Taiwanese imports from 20% to 15%. In exchange, Taiwan committed to investing at least $250 billion in the United States, focusing on semiconductors and artificial intelligence technologies. Economists suggest this agreement could further accelerate Taiwan’s export growth and economic expansion in the coming years.

“We expect AI-related demand to continue underpinning Taiwan’s export performance into 2026, supporting overall economic growth amid sustained global AI investment,” noted Bank of America economists Xiaoqing Pi and Helen Qiao in a recent analysis.

Taiwan has established itself as a powerhouse in manufacturing AI servers, computer chips, and precision instruments. This specialization fueled a remarkable 35% jump in exports last year compared to the previous year, with technology-related shipments leading the surge. Particularly notable was the 78% increase in exports to the United States, reflecting the strengthening economic ties between the two economies.

The global AI boom has been especially beneficial for Taiwan’s leading technology companies, propelling them to unprecedented levels of profitability and revenue. Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker and a key supplier to AI giant Nvidia, has become one of the most valuable companies globally. Similarly, electronics manufacturing giant Foxconn, which produces AI servers for Nvidia and assembles products for Apple, has seen substantial growth driven by AI-related demand.

Despite the impressive performance, economists caution that growth rates will likely moderate in the coming year, primarily due to the high comparison base established in 2024. Deutsche Bank projects Taiwan’s economy will grow at a still-robust 4.8% in 2026, though this represents a significant deceleration from the current pace.

Several factors could potentially challenge Taiwan’s economic momentum. Growing skepticism about the sustainability of the AI boom represents a significant risk for Taiwan, given its heavy reliance on technology exports. Any cooling in global AI investments could have outsized effects on the island’s economic performance.

Additionally, uncertainty regarding future U.S. trade policies under the Trump administration presents another concern for Taiwanese exporters. The possibility of shifting tariff structures or new trade barriers could disrupt the currently favorable export conditions.

Perhaps most critically, ongoing geopolitical tensions with Beijing continue to cast a shadow over Taiwan’s economic prospects. China maintains its claim over Taiwan as part of its territory, despite the island’s self-governance. Chinese military conducted extensive drills around Taiwan in late December 2024, renewing concerns about potential blockades or more aggressive actions that could severely disrupt Taiwan’s export-driven economy.

The remarkable economic performance comes as Taiwan navigates these complex geopolitical and market challenges, balancing its crucial role in global technology supply chains with regional security concerns. For now, the AI-driven boom continues to power Taiwan’s growth, cementing its position as a vital player in the global technology landscape.