Taipei: Taiwan’s central bank is anticipated to maintain its key interest rates unchanged at its upcoming quarterly policymaking meeting on June 19, ahead of potential major tariff decisions by the United States, as stated by Cathay United Bank chief economist Lin Chi-chao.
According to Focus Taiwan, U.S. President Donald Trump’s unpredictable tariff policy has created turmoil in the markets, introducing significant uncertainty. Taiwanese goods imported into the U.S. may face a 32 percent “reciprocal” tariff, and the critical semiconductor sector, a cornerstone of Taiwan’s exports, could be subjected to even higher import duties if Trump proceeds with his tariff threats.
Lin, in an interview with CNA earlier this week, emphasized that Trump’s tariff policies have complicated the global economic landscape. The 90-day suspension on Trump’s “reciprocal” tariffs will end in early July, suggesting that both Taiwan’s central bank and the U.S. Federal Reserve might refrain from changing interest rates until after
the tariff decisions are revealed.
Should this prediction hold true, the Central Bank of the Republic of China (Taiwan) would keep its monetary policy unchanged for the fifth consecutive quarter at the June meeting. The discount rate would remain at 2 percent-the highest in 15 years-while the rate on accommodations with collateral would stay at 2.375 percent, and the rate on accommodations without collateral would continue at 4.250 percent.
Lin indicated that the tariff issues’ impact might become more pronounced in the third quarter of this year. The Directorate General of Budget, Accounting and Statistics (DGBAS) has recently forecasted that Taiwan’s GDP grew 5.35 percent in the first half of 2025, but would slow to 1 percent growth in the second half, partly due to tariff concerns.
He attributed the significant GDP growth in the first half to a surge in exports, as foreign buyers rushed to place orders before the 90-day pause ended, with the tech sector reaping the most benefits. However, the tariff imp
act is expected to significantly decelerate economic growth in the latter half of 2025.
Dachrahn Wu, director of the National Central University’s Research Center for Taiwan Economic Development, expressed that the tariff policy might not only threaten exports but also impact private investment, as some high-tech firms shift production to the U.S.
In addition to tariff worries, Lin noted concerns over a stronger Taiwan dollar against the U.S. dollar, which could shrink profit margins for many Taiwanese exporters. The central bank admitted to actively intervening in the forex market in May to slow the Taiwan dollar’s appreciation after a significant 6.21 percent rise on May 2 and 3.
Despite the intervention, the Taiwan dollar remained strong against the U.S. dollar in May, and without the central bank’s actions, it would have appreciated further, according to dealers. The U.S. dollar’s depreciation is expected to continue, fueled by expectations that the Fed will cut interest rates in September and December
to stimulate the economy.
Lin stressed that Taiwan’s economic stability, rather than inflationary pressures, should be the central bank’s primary focus. Wu noted that the Taiwan dollar has appreciated nearly 10 percent against the greenback since the year’s start, potentially eroding profits for companies outside the tech sector, such as Taiwan Semiconductor Manufacturing Co. (TSMC).
Wang Jiann-chyuan, vice president of the Chung-Hua Institution for Economic Research (CIER), concurred with Wu, stating that while tech companies in the global artificial intelligence supply chain might withstand a stronger Taiwan dollar, traditional industries could suffer from foreign exchange losses.