Taiwan's export surge to U.S. raises concerns over potential trade renegotiations

Taiwan's economy is experiencing a significant boom, largely fueled by the global artificial intelligence (AI) wave. In the first quarter of 2026, the island's GDP grew by an impressive 13.69%, followed by 12.92% in the second quarter. This surge is primarily driven by the U.S. demand for high-end chips. American imports from Taiwan nearly doubled in 2026, reaching $201 billion, up from $116 billion in 2025. Taiwan surpassed China in May to become the third-largest source of U.S. imports, trailing only Mexico and Canada. Chad Bown, a senior fellow at the Peterson Institute for International Economics, highlighted AI as the key factor behind Taiwan's rapidly increasing importance. Dexter Tiff Roberts, a senior fellow at the Atlantic Council's Scowcroft Center for Strategy and Security, described Taiwan's GDP growth as "unstoppable," predicting the trend will continue due to sustained market demand. Taiwan produces about 90% of the world's advanced AI chips, making the U.S. and global markets highly reliant on its output.

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Taiwan's trade surplus with the U.S. has approached $200 billion. Given Trump's consistent opposition to huge trade deficits, he may seek to renegotiate the trade agreement with Taiwan in the future, increasing policy uncertainty.

The Trump administration had previously sought to boost AI investment, with reports suggesting an agreement for Taiwan to invest $500 billion in the U.S. In return, U.S. allowed Taiwanese companies to import products equivalent to 2.5 times the capacity of U.S. factories without high tariffs, and Taiwan agreed to lower tariffs on 99% of U.S. goods. However, Reza Hasmath, an academic advisor at the University of Alberta's China Institute, cautioned that the trade relationship is unbalanced. Taiwan's trade surplus with the U.S. is approaching $200 billion. Given former President Trump's stance against large trade deficits, he may seek to renegotiate the trade agreement with Taiwan, introducing policy uncertainty.

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AI is the key factor behind Taiwan's rapidly increasing importance.

Internally, Taiwan faces challenges. Roberts noted a "K-shaped economy," where the high-tech sector thrives while many young people remain in traditional industries like plastics and textiles, not fully sharing in the AI boom. The semiconductor industry employs only about 350,000 people, yet TSMC alone accounts for roughly 40% of Taiwan's stock market value and 4% of its GDP growth, a concentration Hasmath deems unsustainable. Furthermore, Taiwan grapples with an aging population, with about one-fifth of its people over 65. The island also relies heavily on imported energy and faces water shortages. Coupled with ongoing pressure from China, which criticizes Taiwan's alignment with U.S. tech supply chains, Hasmath warned that a future slowdown in the AI boom could exacerbate these issues, impacting Taiwan's economy and political landscape.

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Taiwan's GDP growth is unstoppable, and this trend is expected to continue because market demand will not disappear in the short term.