Taiwan's Currency Conundrum: Fixing Dutch Disease Explained #shorts

Added: 2026-06-03

[00:00:00]Is there any way to fix this?

[00:00:02]One strategy to reduce the symptoms of Dutch disease is to weaken the currency in order to better support the non-dominant export industries of the island. And well, Taiwan is already trying that, but it's getting harder.

[00:00:13]Taiwan is one of the world's largest holders of foreign currency reserves, holding a record 605.5 billion dollars in 2026. Driven by a robust trade surpluses and government policy aimed at stabilizing the local currency. In fact, while we have been discussing the problems that are arising from upward pressure on the currency, the United States is discussing the opposite, that Taiwan is keeping it artificially undervalued. And the nation has landed itself on the Treasury's monitoring list of potential currency manipulators. Not an ideal place to be, particularly in the midst of trade negotiations and tariff tantrums. [music] In its defense, Taiwan's Central Bank claims its exchange rate policy is simply to maintain the stability of the Taiwan dollar, not to suppress the exchange rate to maintain competitiveness for exporters. But, they have a habit of timely intervention whenever the currency begins to appreciate too much.

[00:00:58]In the name of stability or otherwise, the intended effect is the same. To make matters more complicated, currency depreciation is a double-edged sword. A weak currency makes imports more expensive, decreasing the purchasing power of those already left behind in the name of trying to support exporters.

[00:01:13]But, now that they've caught the ire of the Treasury, they must walk a delicate path in order to not overdo their interventions. A difficult task in light of increased upward pressure from the world's insatiable demand for chips. And while record revenues, orders, and profit margins will allow companies like TSMC to shrug off the impacts of appreciation, the same cannot be said for Taiwan's less glamorous manufacturers. The industries that Taiwan has been trying to prop up may end up even further behind, along with their workers. Next on the list of fixes is diversifying the economy.