According to a statement from Taiwan's Ministry of Finance published on Wednesday, Sept. 7, the last time exports were this slow was in July 2020, when exports expanded by just 0.3 percent due to the impact of the global pandemic. Meanwhile, imports increased by 3.5 percent to $37.35 billion, compared to a 19.4 percent expansion in July.
Economists surveyed by Bloomberg forecasted exports and imports to increase by 11.6 percent and 8.7 percent, respectively. Economists polled by Reuters, meanwhile, predicted an increase in exports and imports by 9.5 percent and 7.1 percent, respectively.
"Winter is coming" earlier than expected, warned Beatrice Tsai, chief statistician for the Finance Ministry during a briefing. The ministry warned that it saw little chance of exports growing by double digits during the third quarter of the year. Worse yet, exports for September could actually shrink by as much as three percent year-over-year.
"While demand for integrated circuits and mineral products continued to be hot, export sales of traditional products such as plastics and base metals were sluggish due to weak end-user demand," read the Finance Ministry's statement.
The fallout in Taiwan's economic prospects continued with other data showing that its combined exports to China, Hong Kong and Macau fell by 9.9 percent in August and its exports to the United States only increased by 2.3 percent.
The Finance Ministry has pinned the blame for the slowing economic growth on factors beyond its control affecting the global economy, such as high global inflation, the economic fallout from the Russian invasion of Ukraine and the "technology war" between China and the United States. The latter is affecting Taiwanese trade even as demand for semiconductors increases. (Related: US, Japan to develop next-generation 2-nm microchips to create redundant global supply.)
These and other factors are also causing the global economy to slow down, impacting demand and snagging trade – which is problematic for Taiwan's vibrant tech and manufacturing sectors, which represent a significant portion of the country's economy and exports.
"There are clearer signs showing that the tech sector has entered a downturn, driven by weakening global demand for mobile phones, PCs and other consumer electronics products, which also weighs on demand for the upstream semiconductors," said Ma Tieying, an economist for Singaporean bank DBS.
The Purchasing Managers' Index – an index showing the economic trends in manufacturing – for Taiwan fell to 42.7 points in August, its lowest level since May 2020. Diminishing demand has also forced Taiwanese manufacturers to cut prices for the first time in more than two years.
In China, Taiwan's largest trading partner and the recipient of nearly 30 percent of the country's exports, uncertainties have risen following the resurgence of the Wuhan coronavirus (COVID-19).
The Chinese Communist Party has been executing its "zero-COVID" strategy to deal with outbreaks, leading to lockdowns all over the country. These lockdowns have threatened demand coming from Taiwan, as business and consumer confidence in China drops. Earlier data suggests that trade relations between Taiwan and China have been withering since July.
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Watch this clip from WION showing China issuing a stern warning over American arms sales to Taiwan.