I am running out of superlatives to describe Taiwan's export story in 2025. So I'll let the numbers speak for themselves: today's October data show semi exports have grown 70% this year, pushing the overall trade surplus last month to 30% of GDP, and the bilateral surplus with the US to 20% of GDP

Macro volatility – in inflation, growth, property prices and the TWD – eased in Q3, and it was no surprise that the CBC was on hold today. That won't change if AI demand growth slows. But the AI cycle has proven tough to forecast, and I'd expect the CBC will also be faced with more TWD strength.

August data today show the impact of the weaker TWD since July: fx reserves fell, import prices ticked up MoM, and CPI inflation rose. The lesson is that without currency strength, the step-change in economic growth since 2020 is more likely to show up in domestic prices.

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.