Taiwanese Dollar Surge and Global Dollar Crisis

US-China Trade Tensions Shake the World Economy

In 2025, a major trade war broke out between the United States and China. Both sides imposed high tariffs—up to 145%—on each other’s goods. This trade conflict disrupted global supply chains and led to two big financial effects: A sharp rise in the value of the Taiwanese Dollar and Fears of a global shortage in US dollars (USD).

This article explains what caused the Taiwanese Dollar to rise, how a dollar crunch could spread, and what this means for the global economy.

Why Taiwan Was at the Center of the Trade Disruption

Tariffs Hit Trade and Supply Chains

On April 3, 2025, the U.S. introduced steep tariffs on Chinese goods. China responded with similar measures. This caused a big drop in U.S.-China trade. Taiwan, which is closely tied to both economies, felt the impact deeply.

Taiwan’s Economy Relies on Exports

Taiwan is a major exporter, especially in technology. In 2024, Taiwan had a $111.4 billion trade surplus with the U.S. Its financial sector is also large—insurers hold overseas assets worth more than the entire country’s GDP, most of it in USD. So any change in currency value hits Taiwan hard.

Why the Taiwanese Dollar Surged in 2025

What Caused the Rise of the Taiwanese Dollar

Between May 1 and May 11, 2025, the Taiwanese Dollar rose almost 9% against the U.S. Dollar. Here’s why:

1. Export Slowdowns: Taiwanese companies stopped hedging their dollar risk due to falling U.S. trade.
2. Insurance Companies React: They sold U.S. assets and bought Taiwanese Dollars to protect themselves.
3. Weak Central Bank Response: The Central Bank of Taiwan didn’t act quickly, which encouraged speculation.

Exchange Rate Numbers

The USD/TWD rate dropped from 32.03 to 30.19 between May 1 and May 11. Some sources even noted a 10% appreciation. This fast movement caused problems for exporters and financial institutions.

Effects of a Strong Taiwanese Dollar on Taiwan’s Economy

Exporters Suffer Losses

A strong Taiwanese Dollar makes exports more expensive. TSMC’s profits dropped, and its stock price fell 2% on May 6. Smaller tech companies also faced losses.

Financial Sector Pressure

Taiwan’s insurers lost money on their U.S. dollar holdings. The government began stress testing banks and insurance firms to prevent further problems.

Trade Politics Shift

Some experts believe Taiwan allowed the Taiwanese Dollar to rise in order to gain favor with the U.S. and seek trade relief.

Global Dollar Shortage: How It May Spread

How a Dollar Crisis Could Happen

As trade stops, companies stop earning dollars. This reduces USD circulation around the world. Here’s how the crisis may grow:

• Shipping Delays mean no goods, no payments.
• U.S. Imports Fall, so fewer USD leave the country.
• China Buys Less U.S. Debt, reducing dollar supply.

Early Warning Signs

• U.S.-China trade is forecast to drop by $900 billion.
• The U.S. dollar weakened briefly in early April.
• The Federal Reserve restarted liquidity programs like repo operations and swap lines.

Who Will Be Hit Hardest

• Developing countries with U.S. dollar debt will struggle.
• Consumers may face product shortages and higher prices.
• Currency traders will see wild swings in global forex markets.

Taiwanese Dollar Surge and USD Crunch: Not a Contradiction

A Two-Stage Economic Shock

At first, the Taiwanese Dollar gained strength. Later, a USD shortage developed. These are two stages of one big economic problem.

Stage 1 (Early May):
Taiwan had extra USD from canceled hedges, strengthening the Taiwanese Dollar.

Stage 2 (Late May):
As trade collapsed, global demand for USD increased, creating a shortage.

This Matches Economic Theory

• The dollar can be weak in one country and strong globally.
• Financial markets respond before real-world trade effects hit.
• Central banks try to manage both currency and liquidity.

How Taiwan and the World Are Responding

What Taiwan Is Doing

• Currency Intervention: The central bank may start stabilizing the Taiwanese Dollar.
• Diversifying Exports: Taiwan is looking beyond China and the U.S. for new markets.
• Negotiating Relief: Taiwan may ask the U.S. for tariff cuts or economic support.

U.S. Policy Changes

• The Fed is adding liquidity to keep USD flowing.
• Tariff exceptions may be offered to protect key supply chains.
• G7 nations could provide emergency support to countries in crisis.

Global Recommendations

• Build backup supply chains outside Taiwan and China.
• Restart global trade talks to reduce long-term risks.

What to Study Next

• Build economic models to track Taiwanese Dollar effects in real time.
• Analyze how other Asian currencies respond to U.S.-China tensions.
• Study how ongoing trade wars are shifting global trade forever.
• Look at how Taiwan’s geopolitical risks shape currency markets.

Final Thoughts: Understanding the Taiwanese Dollar Surge

The sharp rise of the Taiwanese Dollar in 2025 was the first warning of a larger global shock. It showed how closely currency markets and trade flows are connected. What started as a local financial reaction is now developing into a global liquidity crisis.

Governments and central banks must act quickly to avoid more damage. This crisis also shows the need for more stable trade policies and better financial tools to handle shocks. With smart policies and better cooperation, we can avoid the worst outcomes of this economic storm.

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