Taiwan’s Trade Dynamics in 2023: Challenges and Partners Shifting 

Written by Yun-Chieh Wang

Image credit: Containers by astrid westvang/Flickr, license CC BY-NC-ND 2.0 DEED.

Taiwan’s Trade Profile in 2023 

In 2023, the yearly growth rate of international goods trade diminished due to the implementation of stricter monetary policies in key economies, military conflicts between nations, persistent geopolitical tensions, and the continued presence of non-trade barriers. As a country with an economy heavily dependent on international trade, Taiwan has not been able to stay away from the wave of sluggish merchandise trade.  

From Table 1 below, it is evident that both exports and imports in 2023 experienced a negative growth rate compared to 2022. Also, the ratio of trade between the top 3 partners indicates that more than half of Taiwanese exports are concentrated on the market demand from the three countries. Among the top 3 export partners, the exports to two of them—China and Hong Kong— have both experienced a sharply decreasing growth rate in 2023.  

Table 1. Taiwan’s top trading partner in 2023 

Export					Import
Ranking	Export to	Value (Million USD)	Ratio to Taiwan’s total export	Annual growth rate	Ranking	Import from	Value (Million USD)	Ratio to Taiwan’s total import	Annual growth rate
1	China	121,092	22.14%	-20.95%	1	China	84,002	19.96%	-16.41%
2	US	75,052	17.63%	1.58%	2	Japan	54,626	12.59%	-18.87%
3	Hong Kong	64,782	13.07%	-12.75%	3	US	45,690	11.57%	-10.93%
16	UK	4,050	0.84%	-10.48%	20	UK	2,592	0.77%	5.13%
	Total	479,415	100%	-9.79%		Total	428,082	100%	-17.80%

Furthermore, the product level data in Table 2 shows that Taiwanese exports and imports significantly depend on one single product type—electrical machinery and equipment. It is well-known that Taiwan has a preceding position in the export of semiconductors (H.S. code 8541), which is widely applied in cars, mobile phones, and televisions. These are the items that people are more reluctant to replace when the economy is less optimistic. Thus, as many countries face weak economic growth, Taiwan’s unbalanced reliance on semiconductors seems to exacerbate its trade growth in 2023. 

Table 2. Taiwan’s top trading products in 2023 

Export					Import
Ranking	Export products  (H.S. code)	Value (Million USD)	Ratio to Taiwan’s total export	Growth rates compare to 2022	Ranking	Import products  (H.S. code)	Value (Million USD)	Ratio to Taiwan’s total import	Growth rates compare to 2022
1	85	222,653	51.48%	-9.74%	1	85	107,408	30.52%	-15.84%
2	84	77,265	17.87%	22.38%	2	27	57,325	16.29%	-26.51%
3	39	17,642	4.08%	-23.50%	3	84	49,783	14.15%	-23.07%

Despite the decrease in trade flow, Taiwan has faced a positive annual growth in the trade gap, with the value increasing from 51 trillion in 2022 to 80 trillion in 2023, representing an annual growth rate of 56% on the trade gap. As the Taiwanese Ministry of Economic Affairs pointed out, the growth could be attributed to the consequence of the reshoring of  Taiwanese enterprises and the increasing foreign investment in Taiwan.  

Bilateral Trade Relationship 

To look at Taiwan’s trade dependency rate with its selected partners, it is evident in Table 3 that the dependency rate on China in both export and import has declined since 2020, with an export dependency rate drop of more than 7%. On the other hand, the market demand from the U.S. and ASEAN countries has been growing in 2023, which can be explained by the effort by the Taiwanese government to decentralize its trade dependency on one single partner. To achieve this goal, the Taiwanese government has been dedicated to improving pragmatic economic ties with its critical partners. However, several significant events happened in 2023 that could have long-term influences on its trade performance in the future. 

Table 3. Taiwan’s trade dependency on the selected country 2020-2023 

Partner	China		US		ASEAN		UK
Year	Export	Import	Export	Import	Export	Import	Export	Import
2020	29.68%	22.22%	14.65%	11.36%	15.42%	12.55%	0.97%	0.66%
2021	28.21%	21.60%	14.72%	10.28%	15.74%	12.37%	0.93%	0.62%
2022	25.26%	19.62%	15.65%	10.67%	16.81%	12.60%	0.84%	0.61%
2023	22.14%	19.96%	17.63%	11.57%	17.64%	11.66%	0.84%	0.77%

First agreement under U.S.-Taiwan Initiative on 21^st Century Trade 

The United States has been one of the robust trading partners to Taiwan, as Table 1 shows that it is Taiwan’s second-largest export destination and the third-largest import origin in 2023. The two countries signed the “U.S.-Taiwan Initiative on 21st Century Trade” in 2022 to further enhance the economic and trade relationship, and have reached the first agreement in June 2023, covering topics such as good regulatory practices, services domestic regulation, anticorruption, and small- and medium-sized enterprises (S.M.E.s). Furthermore, the two sides initiated the second negotiating round in August 2023, focusing on emerging trade topics like labour, environment, and sensitive issues such as agricultural products. The initiative is a substantive progress in the relationship between the two countries and a pragmatic step to enhance trade between the two sides. 

UK-Taiwan’s Enhanced Trade Partnership 

The Taiwanese and U.K. governments signed the “Enhanced Trade Partnership” (E.T.P.) Arrangement on 8 November 2023, with the agreement to facilitate engagement on topics related to digital trade, investment, renewable energy, and net zero. According to the Executive Yuan, this is Taiwan’s first agreement with a European country, and the topics are expected to expand to other trade-related issues. As the UK became an official member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in July 2023, it is believed that the strengthened Taiwan-UK economic ties could facilitate Taiwan’s accession application to CPTPP. 

Chinese termination of the preferential treatment to 12 chemical products under ECFA 

Starting in 2021, China has implemented several import bans on Taiwanese fisheries and agricultural products to enter the Chinese market, leading to a negative shock on Taiwanese exports as China is the main destination of many products affected. Furthermore, in April 2023, China accused Taiwan of setting unjustified trade barriers on 2,455 products and later unilaterally claimed Taiwan breached W.T.O. rules without any evidence or judgment provided by the W.T.O. In addition, China has announced that the preferential treatment granted to 12 chemical products under the Economic Cooperation Framework Agreement (ECFA), signed by two sides in 2010, would be suspended starting from the first day of 2024. Frankly, there is never a lack of criticism of the Chinese government’s political intention behind those behaviours; moreover, it explains the risk and danger of a high trade dependence on one country and further proves the rationale of the Taiwanese government to decentralize its trade with the partners, as presented in Table 3. 

To conclude, in the review of Taiwanese trade in goods in 2023, the country still heavily depends on a single group of products for its economy. As for bilateral trading partners, China is still the most important trading partner to Taiwan in terms of both exports and imports. However, regarding the risk of overly depending on one single source for trade, the Taiwanese government has been dedicated to diversifying its trading profile. The analysis shows that the dependency rate on trade with China started to decrease in 2020. Meanwhile, Taiwan has been progressively establishing a robust trade relationship with its critical partners, demonstrated by signing the “U.S.-Taiwan Initiative on 21^st Century Trade” and TUK-Taiwan E.T.P. in 2023.  

Yun-Chieh Wang holds a Master of International Economics from the Geneva Graduate Institute and a Master in Public Policy from the University of Tokyo, and obtained her bachelor’s degree in Agricultural Economics from National Taiwan University. Her great passion for international trade has motivated her to develop a career to understand the interaction between trade and domestic policy. Before moving to Geneva, she worked at the Chung-Hua Institution for Economic Research (CIER), with a focus on WTO & RTA topics to cultivate skills in analyzing dynamic global trade environments.

This article was published as part of a special issue on “2023 to 2024: Looking Back, Thinking Ahead.”