July export orders data show a continued reshoring, but overall export orders have clearly peaked. Today's Q2 BOP data show the rise in exports has further boosted the current account surplus. With the surplus so large, the TWD is vulnerable to the sort of shifts in capital flows seen in Q2.

The government today confirmed the export surge of 1H – and released much less pessimistic forecasts for 2H. The underlying story is simple: AI-related demand offsetting the impact of TWD appreciation and tariffs. Exports are now expected to grow almost 25% this year, and GDP by 4.5%.

The export surge is boosting demand for labour, with data today showing manufacturing overtime hours in June near the highest in 15 years, and wage growth of close to 4% YoY. Overall wage growth has also trended up, but less quickly, because the demand:supply balance in services isn't as tight.

The surge in exports continued in July. Exports have now grown 30% just this year, and the trade surplus has risen to 20% of GDP. But the underlying dynamics shifted last month. Rather than semi exports to the US, the big driver was other exports to ASEAN. That looks more like tariff front-loading.

The biggest takeaway from today's July price data is the big fall in TWD import prices – and thus PPI and goods in CPI – on the back of currency appreciation. Core actually ticked up in July, and probably isn't going back to the sub-1% rate of pre-covid. But I doubt it gets back above 2% either.

The PMIs haven't been great lead indicators this year: they've been mainly below 50 in Q2, and yet export data have been absurdly strong. Some of that is because the export story has become so concentrated in semiconductors. Still, it is likely that the real economy will be quite a lot weaker in 2H.

It isn't news, but the strength of exports in today's GDP release is still eye-catching. It keeps Taiwan on the much higher post-2020 plane of growth. But with consumption weakening, GDP is now almost all about exports. If there's been lots of tariff front-loading, 2H25 will look very different.

Three things stood out in TSMC's earnings call yesterday: the lack of talk of "tariffs", the bullishness on demand, and confidence on margins despite TWD strength. The message has macro significance, with one risk that while TSMC and the government expects a much slower 2H, that is too pessimistic.

Overall exports, and the trade surplus with the US, continued to surge in June. That Taiwan nonetheless wasn't the recipient of a Trump letter may be because of the sharp rise in the TWD. Other data today show that helping to push down inflation, opening up space for interest rate cuts.