Taiwan Records Fastest Economic Growth in 15 Years Driven by AI Demand
Taipei, Sunday, 1 February 2026.
Fueled by insatiable global AI demand, Taiwan’s economy expanded 8.6% in 2025—the fastest pace since 2010—anchored by a massive 78% surge in exports to the United States.
Unprecedented Fourth Quarter Surge
The economic momentum accelerated significantly toward the end of the year. According to preliminary data released by the government statistics agency on Friday, Taiwan’s economy grew by a staggering 12.68% year-on-year in the fourth quarter of 2025, shattering expectations and outpacing the 8.2% growth recorded in the third quarter [2]. This year-end sprint pushed the full-year GDP expansion to 8.63%, the highest level since 2010 [2][3]. The disparity between external and domestic drivers was stark; net demand from global markets contributed 11.91 percentage points to the fourth-quarter growth, while domestic demand added a mere 0.77 percentage points, underscoring the island’s acute sensitivity to the global tech cycle [3].
A Historic Shift in Trade Dynamics
This growth is fundamentally underpinned by a realignment of global supply chains. Total exports reached a record $640.75 billion last year, with shipments to the United States skyrocketing by 78% [4]. This surge has reshuffled Taiwan’s trade portfolio: the U.S. now accounts for nearly 31% of Taiwan’s total exports, surpassing China—which stands at 27%—as the island’s largest export destination for the first time since 1999 [4]. This pivot was further cemented earlier this month when the Trump administration agreed to a trade deal lowering tariffs on Taiwanese imports to 15% from 20% in exchange for $250 billion in investment pledges, a move expected to sustain export momentum into 2026 [1][5].
Tech Giants and Market Concentration
The artificial intelligence boom has concentrated economic power within a few key players. TSMC, the world’s leading contract chipmaker, has seen its dominance grow, with its share of the Taiex index swelling to over 44%, up from approximately 24% in 2020 [3]. Alongside electronics giant Foxconn, which manufactures AI servers for Nvidia, these firms are capitalizing on an industrial frenzy that has driven corporate revenues to record highs [1]. However, this concentration presents risks; economists warn that the economy’s heavy reliance on a single sector leaves it vulnerable to potential asset bubbles in the AI market [1].
2026 Outlook and Geopolitical Risks
Looking ahead, maintaining this velocity will be challenging due to the high statistical base established in 2025. While Deutsche Bank forecasts a moderation to 4.8% growth in 2026, other consensus forecasts sit around 3.9% [1][3]. More optimistic projections, however, have recently been upgraded to 6.8%, banking on sustained tech demand [3]. Beyond economics, geopolitical instability remains a potent variable. Tensions with Beijing persist, highlighted by large-scale military drills conducted around the island in late December, which continue to cast a shadow of uncertainty over the region’s economic future [1][5].