Taiwan exports post surprise growth as trade war pushes production at home

Taipei — Taiwan's exports unexpectedly grew for the first time in eight months in June as strong US demand helped boost expansion amid the prolonged Sino-US trade war.

Taiwan’s June exports gained 0.5% from a year earlier, the first growth since October, finance ministry data showed on Monday. The exports hit $28.39bn, a record for June.

A Reuters poll had forecast a 4% fall. In May the trade-reliant economy’s exports contracted 4.8% from a year earlier.

Returning production

Finance ministry official Beatrice Tsai told reporters the better-than-expected June growth was boosted by “returning production” from Taiwan manufacturers who moved parts of their supply chain to the island, as well as an increasing demand for semiconductor products.

“The return to growth of exports was earlier than expected, mainly thanks to manufacturers who have been moving their production back to Taiwan since last year,” said Yuanta Securities economist Woods Chen.

“We expect exports to remain on the positive side in the second half, though the growth would be minor,” Chen said.

ING said the export growth is positive but “it is too early to celebrate”, adding that “we doubt that the moving of factories from mainland China to Taiwan will change the landscape for trade.”

A growing number of Taiwan manufacturers, including computer-maker Compal Electronics, are moving to shift production from China to other factories in the region because of US President Donald Trump’s tariffs on Chinese imports.

Taiwan’s factories are a key part of the global supply chain for tech giants such as Apple.

In June, Taiwan’s exports to the US rose 18.5% on the year, helped by double-digit yearly growth from telecom and machinery products. Shipments to China fell 3.8%, while exports to Europe fell 8.6%.

The finance ministry expects exports in July to be between 1% growth and 1% contraction.

KGI Securities economist Carl Liu said the growth in June was boosted by a surge of telecom orders from the US, but he cautioned that trade friction remains the “biggest uncertainty” for Taiwan’s exports.

In June Taiwan’s central bank again cut its 2019 economic growth forecast, citing a slowing global economy and trade war uncertainties.

Reuters