Taiwanese Stocks Plummet After U.S. Tariffs Imposed

Taiwan's stock market experienced its largest single-day percentage drop on record, plummeting nearly 10% on Monday. This dramatic fall followed the announcement of new U.S. tariffs, which included a 32% duty on Taiwanese goods. The market's reaction underscores deep concerns about the economic impact of these tariffs and the future of U.S.-Taiwan trade relations.

Taiwan Stocks Plunge Amid Tariff Fears

Taiwan's benchmark stock index (.TWII) saw a nearly 10% decline on Monday, marking its lowest level in over a year. This significant drop occurred as trading resumed after a holiday closure, with investors reacting to the U.S. tariffs announced last week. The U.S. singled out Taiwan due to its substantial trade surplus with the country.

Government and Market Responses

In response to the market turmoil, Taiwan's government and financial regulators have taken several steps:

• Support Package: Taiwan announced an NT$88 billion ($2.65 billion) support package for companies affected by the tariffs.
• Short-Selling Curbs: The top financial regulator imposed temporary curbs on short-selling of shares, effective for the entire week, to mitigate market volatility.
• National Stabilisation Fund: The government-run National Stabilisation Fund, with assets of approximately NT$500 billion, indicated it might intervene to restore confidence, acknowledging that short-term fluctuations are unavoidable.
• Coordination: The Taiwan Stock Exchange Chairman, Sherman Lin, stated that the exchange would coordinate with financial regulators for further stabilization measures if necessary, emphasizing flexibility in handling volatility.

Presidential Assurance and Future Outlook

President Lai Ching-te has sought to reassure the public and international partners, pledging a "golden age" of shared prosperity with the U.S. He reiterated Taiwan's commitment to increasing U.S. imports and pursuing a "zero-tariff" regime between the two nations. Taiwan has long aimed for a free trade deal with the United States.

Despite semiconductors, Taiwan's primary manufacturing strength, being exempt from the new tariffs, the island's trade-dependent economy remains highly vulnerable due to its integral role in the global electronics supply chain. Major companies like TSMC and Foxconn saw their shares fall by nearly 10%, triggering circuit breakers.

Analysts express significant concern, with Venson Tsai of Cathay Futures noting "very high panic selling pressure" and a "problem of market confidence." Allen Huang of Mega Financial's securities investment unit warned of a potential recession, stating the chance could be over 50% in a worst-case scenario, as a change in U.S. policy is not expected soon. Goldman Sachs has also downgraded Taiwan to "underweight" in its Asian market allocations, citing high exposure to U.S. exports and market sensitivity.

Sources

• Taiwan stocks plummet in biggest one-day drop on record after US tariffs, Reuters.