Taiwan's trade surplus narrowed from $6.71 billion in April to $4.89 billion in May. Exports fell 14.1 percent on the year after falling 13.3 percent previously, while imports dropped 21.7 percent after a previous decline of 20.2 percent. PMI survey data published last week showed Taiwan's manufacturing sector contracted again in May and at a more pronounced rate.

Exports of electronic components fell 9.9 percent on the year in May after dropping 8.6 percent in April, offset by further strength in exports of information, communication and audio-video products, up 11.9 percent after an increase of 5.4 percent previously. Exports to mainland China and Hong Kong were again weak, down 19.4 percent on the year after falling 22.0 percent previously, while year-over-year growth in exports to the United States dropped 3.5 percent after a previous fall of 10.3 percent. Petroleum imports fell 17.0 percent on the year after falling 11.6 percent previously, while imports from mainland China and Hong Kong fell 27.2 percent after a previous decline of 23.4 percent.

The international trade balance measures the difference between imports and exports of both tangible goods and services. Imports may act as a drag on domestic growth and they may also increase competitive pressures on domestic producers. Exports boost domestic production. Trade balance values are calculated by deducting imports (cif) from exports (fob). The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade and can offer a guide to an economy's competitiveness.

Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect currency values in foreign exchange markets.

Imports indicate demand for foreign goods and services in the local economy. Exports show the demand for local goods in countries overseas. Movements in the trade balance directly affect GDP growth because of Taiwan’s high reliance on trade. Stronger exports are bullish for corporate earnings and the stock market. The bond market is also sensitive to the risk of importing inflation.

This report also gives a breakdown of trade with major countries as well, so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.