TAIPEI (Reuters) - Taiwan's trade-reliant economy is expected to grow at a slower pace in 2025 than previously forecast, with the threat of turbulence from tariffs that may be imposed by the United States, as well as parliament-imposed budget cuts. Taiwan is a key link in the global technology supply chain for companies such as Apple Inc ( AAPL ) and Nvidia ( NVDA ), and is home to the world's largest contract chipmaker, Taiwan Semiconductor Manufacturing Co Ltd ( TSM ) . U.S. President Donald Trump has floated a proposal for a minimum 25% tariff on chips. Taiwan has responded to the tariff threat with diplomatic overtures and plans to discuss chip investment in the United States. The United States is Taiwan's second-biggest export destination after China. The Trump administration has announced wide-ranging tariffs "affecting global trade momentum and pushing up inflationary pressure, and intensifying economic uncertainties," the Directorate General of Budget, Accounting and Statistics said in a statement on Wednesday.

Taiwan could feel the pinch as its exports become affected by potential tariffs from the third or the fourth quarter, the statistics agency added. Taiwan's gross domestic product for this year is now expected to be 3.14% higher than last year, the agency said, revising down the 3.29% forecast it issued in November. That would be lower than the 4.59% growth rate for 2024. The agency said budget cuts imposed by Taiwan's opposition-dominated parliament would also reduce economic growth this year given it would mean less government investment and spending. However, exports this year were expected to grow 7.08%, the agency said, upgrading a previous forecast of 5.98%.

The statistics agency nudged up the 2025 consumer price index (CPI) forecast to 1.94% from 1.93%.

The economy expanded by 2.9% in the fourth quarter from a year earlier, it said, revising upwards a preliminary 1.84% reading.