Taipei: A 1 percent appreciation of the Taiwan dollar against the U.S. dollar reduces earnings per share (EPS) for technology companies by 1.5 percent, Lin Por-fong, chairman of the Third Wednesday Association-a group of prominent Taiwanese business leaders-warned Wednesday. At a regular meeting of the organization, Lin highlighted the potential economic impact on Taiwan's export-oriented economy, emphasizing that a stronger Taiwan dollar could lead to foreign exchange losses for local exporters.

According to Focus Taiwan, in May, the Taiwan dollar surged by NT$2.088, or nearly 7 percent, against the U.S. dollar amid market speculation that the U.S. had pressured Taiwan to allow currency appreciation as part of ongoing trade and tariff negotiations between the two sides. Although the central bank admitted to intervening in the market to support the U.S. dollar, it denied any external pressure from the U.S. for a stronger Taiwan currency.

In June, the appreciation of the Taiwan dollar persisted as tensions in the Middle East escalated. So far this month, the Taiwan dollar has gained an additional NT$1.31 percent to close at NT$29.542 on Wednesday. Earlier this week, the currency even reached NT$29.460, its highest point in over three years, before central bank intervention, according to market dealers.

Lin noted that for tech companies, each 1 percent appreciation of the Taiwan dollar results in a 1.5 percent drop in EPS due to significant foreign exchange losses. He also pointed out that the machine tool industry, already facing competition from countries like Japan, suffers from reduced price competitiveness in international markets due to a stronger currency.

The financial sector, especially insurance firms with substantial foreign assets, also faces considerable forex losses as a result of the higher Taiwan dollar, Lin added. He urged the government to stabilize the currency to preserve the competitiveness of Taiwanese exporters globally.

Lin's concerns align with those of leading Taiwanese tech companies. Taiwan Semiconductor Manufacturing Co. (TSMC) has indicated that each 1 percent appreciation in the local currency reduces its operating margin by 0.4 percentage points. Similarly, United Microelectronics Corp. (UMC) reported a similar impact on its gross margin.

Lin emphasized that Taiwan should prioritize its own interests during tariff negotiations with the U.S., while working to reduce its trade surplus with Washington. U.S. President Donald Trump announced "reciprocal" tariffs on April 2 on countries with high trade surpluses with the United States, including a 32 percent import duty on goods from Taiwan. However, Trump later announced a 90-day pause to allow for negotiations of a lower tariff.

Taiwan's trade surplus with the U.S. increased from US$47.8 billion in 2023 to US$73.9 billion in 2024.