August 7, 2019 / 9:16 AM / 17 days ago

UPDATE 1-Weak China demand, trade war knock Taiwan's July exports back into contraction

* July exports -0.5% y/y vs Reuters poll f'cast +0.5%

* Exports to U.S. +21.7% y/y, to China -3.6%

* Aug exports to be in range of -0.5% to +1.5% y/y - ministry

TAIPEI, Aug 7 (Reuters) - Taiwan's exports unexpectedly fell in July, weighed down by persistently weak demand from China as the Sino-U.S. trade war escalated.

Shipments to the United States accelerated to a record high, however, helped by strong demand for telecommunications and electronic products.

Taiwan's total July exports contracted 0.5% from a year earlier to $28.2 billion, finance ministry data showed on Wednesday.

Analysts polled by Reuters had forecast shipments would grow 0.5%. Exports unexpectedly grew 0.5% in June, their first expansion in eight months.

Taiwan's factories are a key part of the global supply chain for tech giants such as Apple Inc, and its exports have suffered from both trade war disruptions and sluggish global demand for hi-tech gadgets like smartphones.

The United States sharply raised tariffs on a large number of Chinese products in May, and President Donald Trump stunned financial markets last week by vowing to impose even more levies on $300 billion of China imports from Sept. 1.

Many of the products covered by the latest threatened round of tariffs are electronics, further clouding Taiwan's export outlook in the second half, analysts said.

"To Taiwan, the trade disruption impact of 10% tariffs on $300 billion Chinese exports is likely to be bigger than that of the 25% tariffs imposed on $250 billion Chinese exports so far," DBS economist Ma Tieying wrote in a note.

She said the extra tariffs could cut the island's GDP growth by 0.4 percentage points growth in the second half.

Taiwan's July exports to the United States surged 21.7% on-year, picking up pace from June.

But shipments to its other major markets fell, with exports to China down 3.6%, Japan off 7.7% and Europe slipping 2.0%.

The finance ministry said it expected August exports to be in a range between 1.5% growth and a 0.5% contraction.

Taiwan's economy grew by a stronger-than-expected 2.41% in the second quarter year-on-year, boosted in part by manufacturers which moved production back to the island from China as the Sino-U.S. trade dispute intensified. (Reporting By Yimou Lee ad Roger Tung; Editing by Kim Coghill)

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