GDP growth in Q125 reached almost 10% saar. That is all about exports, and so is vulnerable to tariffs. But it also furthers the step-change in growth evident since 2020. Before then, Taiwan was growing at a similar pace to Korea. Now, the two economies couldn't look more different.

Taiwan macro doesn't attract much attention, but its experience matters. Taiwan was most exposed to the 2000s China shock. That it then suffered near-deflation reflected tight fiscal policy, a lesson that needs to be learnt in dealing with the latest shock, this time emanating from the US.

In advance of the CBC meeting this week, a short slide pack on the key themes in Taiwan. In particular, the rise in inflation (I took the photo at my favourite bread shop here today) and Trump's agenda keep the TWD in play for a structural realignment stronger.

The spike in inflation seen in January isn't unexpected given consumer spending on the back of this year's early Chinese New Year. The strength of exports can't be explained away in the same way, and suggests Taiwan's relative outperformance is continuing.

Despite a surge in capex, GDP growth slowed in Q424 to 1.8% YoY, the lowest since September 2023. 2025 as a whole should be better, with modest growth in exports and private consumption. The upside risk is wage growth feeding into stronger consumption. Downside comes from the Trump tariff threat.

Already Taiwan's dominant firm, strong 2024 results mean TSMC has now doubled in size just since 2021. The firm remaining bullish for 2025 is this a reason to be optimistic about Taiwan's exports, but also to think the domestic cycle can warm up further. The contrast with Korea is huge.

Taiwan has the strongest cyclical picture in the region. It isn't gaining further momentum, so rate hikes aren't likely, but nor are cuts. The other big factor is Trump. He won't like either Taiwan's massive trade surplus, or its modest military spending.

The CBC kept policy unchanged yesterday, and won't be in a rush to move in 2025. Growth will be slower, but the bank isn't particularly worried about either exports, or domestic demand. Optimism about consumption is partly because of expected wage hikes, which in turn will support inflation.

There's rarely much interest in Taiwan macro. But 2025 could be different: with post-2020 domestic economic lift-off, and the return of Trump, the circumstances that have kept the TWD undervalued for 20 years might be changing. This is a detailed chart pack looking at the issues involved.