Taiwan's economy has expanded at a striking pace, growing 12.92 percent in the second quarter of 2025, driven largely by soaring global demand for AI semiconductors — the island produces roughly 90 percent of the advanced chips used to power leading AI models. The boom has propelled Taiwan's stock exchange to become the fifth largest in the world by market capitalisation, and pushed it past China to become the third-largest source of US imports, after Mexico and Canada. However, analysts warn the growth rests on fragile foundations: a swelling trade surplus with the US — nearing $200 billion — could invite backlash from President Trump, who has historically pushed back against countries that export far more to the US than they import. Domestically, the benefits remain narrow, with the chip sector employing at most 350,000 people and the dominant chipmaker TSMC (Taiwan Semiconductor Manufacturing Company) accounting for around 40 percent of Taiwan's stock market alone, raising fears of a K-shaped economy in which wealth concentrates at the top while other sectors stagnate. China's continued political pressure on Taipei and Taiwan's ageing population and energy import dependency add further uncertainty to what experts describe as a boom that, for now, is real — but may not be sustainable.