The Forex fluctuations caused by the reciprocal tariffs initiated by Trump and the impact on countries around the world have caused the U.S. stock market to fall into a bear market. Major large-scale listed companies have experienced a sharp drop in stock prices of more than 20% due to reciprocal tariff and forex.
Forex (Foreign exchange rate)
Dollar falls to three-year low
Since Trump took office, the dollar has fallen to a three-year low due to the following three reasons:
- Due to Trump’s reciprocal tariff policy
- Suppressing the value of currencies around the world
- In addition, he has continued to criticize Fed Chairman Jerome Powell since taking office, putting pressure on Powell to cut interest rates.
These reasons have caused the US dollar to weaken since Trump took office. On April 21, 2025, the U.S. dollar index, which tracks the U.S. dollar against six major currencies, fell to 97.923, its lowest level since March 2022.
New Taiwan Dollar Exchange Rate
The New Taiwan dollar rose 3% in a single day on May 2, 2025, the largest increase in nearly 40 years. On May 5, the intraday increase was 4.7%, setting a new record, and the exchange rate rose by 2.96% at the end of the day, reaching a three-year high. On the same day, the Taiwan stock market opened high and ended down 254.65 points, a drop of 1.23%. This means that the New Taiwan dollar exchange rate has increased by nearly 6% in two days!
Taiwan’s official response
On May 5, 2025, President Lai Ching-te and Central Bank Governor Yang Jinlong were forced to issue statements and hold press conferences on the same day, denying that they would use the appreciation of the Taiwan dollar as a bargaining chip in negotiations with the United States, and denied that they would push up the Taiwan dollar under pressure from the United States.
South Korean official statement
Foreign media such as Bloomberg and Reuters reported on May 6, 2025 that the appreciation of the Taiwan dollar was partly due to unconfirmed speculation that the US trade agreement may involve a readjustment of the exchange rate. Lee Chang-yong, president of the Bank of Korea, confirmed this on the 6th.
He said that the pressure from the United States on Asian countries is one of the reasons for the continued appreciation of Asian currencies, including the Korean won. However, South Korea acknowledged the pressure from the United States. During his attendance at the Asian Development Bank’s annual meeting, Bank of Korea President Lee Chang-yong said that one of the reasons for the appreciation of Asian currencies such as the Korean won was “the pressure put on Asian countries by the US government.”
TSMC case study
“Every 1% depreciation of the U.S. dollar against the New Taiwan dollar will cause TSMC’s operating profit margin to fall by 0.4 percentage points.” According to TSMC’s annual report, almost all of its revenue is denominated in U.S. dollars, and more than half of its capital expenditures are paid in non-New Taiwan dollars, mainly in U.S. dollars, euros and yen.
Therefore, any significant adverse fluctuations in the New Taiwan Dollar against these currencies, especially the weakening of the U.S. Dollar against the New Taiwan Dollar, may have an adverse impact on TSMC’s revenue and profits expressed in New Taiwan Dollars.
Regarding the impact of exchange rate fluctuations, TSMC’s annual report states in its financial risk statement: “Every 1% depreciation of the U.S. dollar against the New Taiwan dollar will cause TSMC’s operating profit margin to fall by 0.4 percentage points.” TSMC originally required suppliers to reduce the price of raw wafers by at least 30% next year.
Now, due to the rapid increase in exchange rate pressure, it is reported that TSMC has expanded its requirements for multiple suppliers to submit new quotations in advance this month. Currently, the suppliers are all over the place.
US dollar exchange rate to Taiwan
The Wall Street Journal pointed out on May 6, 2025 that Taiwan has had a huge trade surplus with the United States for many years and has an astonishing amount of U.S. dollar assets. Life insurance companies alone hold more than $700 billion in foreign bonds, with U.S. bonds accounting for the majority. U.S. companies such as Apple and Pfizer have issued dollar bonds to Taiwan. Once the US dollar depreciates or asset values fall, Taiwanese businesses will suffer losses and may adjust their investment layout.
As of 2024, Taiwan’s foreign exchange reserves will rank sixth in the world. According to data released by the U.S. Treasury Department in April 2024, Taiwan is the 11th largest holder of U.S. Treasury bonds, with a scale of US$290.4 billion. The Central Bank of Taiwan revealed in the Legislative Court that more than eight out of ten Taiwan’s foreign exchange reserves are assets such as U.S. dollar bonds. Not only the Central Bank, but also Taiwan’s life insurance companies, banks and other financial institutions hold a lot of U.S. debt.
US’s bad Records
On September 22, 1985, in order to suppress the rise of Japan’s economy, the United States jointly intervened in the foreign exchange market, causing the dollar to depreciate in an orderly manner against major currencies such as the yen and the German mark in order to solve the huge US trade deficit.
The United States openly intervened in the exchange rate at a meeting of the central banks of Japan, Britain, France and Germany, forcing Japan to sign the famous Plaza Accord. Japan had no choice but to comply with the United States’s substantial appreciation of the yen. The subsequent side effects began to emerge many years later, causing Japan’s economic growth to stagnate until now.
Mar-a-Lago Agreement
In November 2024, Stephen Miran, chairman of the White House Council of Economic Advisers, mentioned the Mar-a-Lago Accord in a report, which proposed that the United States should use tariffs to pressure its trading partners to promote the depreciation of the US dollar, and require countries with trade surpluses with the United States to purchase interest-free 100-year U.S. Treasury bonds to respond to the U.S. debt crisis. The name “Mar-a-Lago Agreement” comes from Trump’s private resort Mar-a-Lago in Florida.
Impact to Taiwanese investors
I once published a post titled “Should investors care about currency exchange risk when investing in US stocks?” has analyzed in detail the impact on Taiwanese investors investing in US stocks. My opinion is: unless you are a short-term foreign exchange speculator or a short-term US stock investor, long-term investors are simply worrying about nothing.
Even if there are exchange losses, they are almost negligible compared to the capital gains from long-term investments. What’s more, in the long run, you can make a profit from the price difference by exchanging US dollars for New Taiwan dollars. If you are interested, you can refer to my post “Should investors care about currency exchange risk when investing in US stocks?” The numbers in the article are sorted.
Reciprocal tariffs
Industries hardest hit
Not just electronic devices, any business with physical products will be impacted. Moreover, Trump will impose additional tariffs on semiconductors and pharmaceuticals, two industries with relatively large shares and in which the United States is particularly concerned about China’s catching up. Software companies have been less affected in comparison, but it is still impossible for them to survive because Trump’s policies are volatile and he often makes sudden moves.
No industry is immune
In addition, even if the company itself has a low correlation with imports and exports, due to the globalization of companies in the past nearly three decades, the manufacturers in the company’s supply chain will definitely be affected, resulting in no manufacturer being able to escape from this reciprocal tariff. The only difference is the extent of the impact.
Table for companies impact
| Ticker | 4/4/2025 share price | Drop from all-time high in this period | Reciprocal tariff and forex impact |
| AAPL | -9.25% | -33.43% | Apple:$900M tariff cost for Q2 2025 |
| AMZN | -7% | -30.88% | Operating profit fell by 15-20%, with a loss of $5-10B |
| NVDA | -7.80% | -36.89% | Nvidia:4-6B revenue impact for 2025 |
| NFLX | -6.67% | -19.15% | Netflix:2B movie produced in India |
| MSFT | -3.56% | -23.95% | 10-15% cloud and AI projects to be delayed |
| PLTR | -11.47% | -40.61% | Palantir: Reciprocal tariff is a big challeng |
| WMT | -4.66% | -22.14% | 1/3 products are imported, lay off 800 employee |
| NKE | -14.44% | -44.90% | Need to raise price 10% to 12% |
| TSLA | -10.42% | -53.77% | China made EV decreased 82.3％ in Mar 2025 |
| F | -5.92% | -40.27% | Ford: 1.5B profit loss |
| GPS | -20.29% | -39.24% | Products imported from Vietnam, India, and China |
| UUP | -1.9% | -11.78% | Dollar index falls to three-year low |
| S&P 500 | -6% | -20.80% | $1.167 trillions (7%) annual revenue are from China |
Impact on the United States
Artificial uncertainty created by the United States
“Uncertainty” is the biggest challenge for business operations and stock investment. Tariffs are the most typical uncertainty, while exchange rates are an issue that inevitably arises from global trade. The two are symbiotic.
It is precisely because of Trump’s personality as a self-proclaimed tariff man that countries around the world have long been suspicious of the United States. They are worried that the United States will actually implement the weaponization of tariffs and exchange rates, and that no country will be excluded, which is tantamount to the United States openly making an enemy of all countries in the world.
The United States is losing global trust
The events triggered by the tariffs and exchange rates instigated by the United States in order to solve its own long-standing deficits and trade imbalances, as well as the struggle for hegemony with China, have far-reaching consequences. It is not just a trade war on the surface – it will cause irreparable damage to geopolitics, international order, and global norms. Even if Trump announces an immediate halt to these policies, it will not be possible to return the world to the way it was before – because the damage to the dollar, U.S. debt, the United States’ international credit, and the United States’ global leadership after World War II has already been done.
Closing words
The economic problems caused by the sharp rise in inflation in the United States over the past three years have not yet been fully resolved, and now there are completely man-made issues of reciprocal tariffs and exchange rates. There is no doubt that this will make the US economy even worse. The impact on the United States itself will be difficult to recover from within a few years.
I am the author of the original text, the essence of this story was originally featured on Smart Magazine, Issue of June 2025
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