Taiwan's Manufacturing Sector Faces Headwinds: Trump Tariffs and Economic Uncertainty

Business Sentiment Dips as Manufacturers Navigate a Shifting Global Landscape

Taipei, Taiwan - Business confidence among manufacturers in Taiwan witnessed a downturn in March, largely attributed to the impact of the Trump administration's tariff policies, according to the Taiwan Institute of Economic Research (TIER).

Data from TIER, a prominent Taiwanese think tank, indicates the composite index measuring business sentiment among local manufacturers declined by 2.71 points from the previous month, settling at 95.00 in March. This marks the lowest point in five months.

The service sector also experienced a dip, with TIER's composite index falling by 4.50 to 88.51, the lowest level in nearly five years. The construction industry's index also declined significantly, dropping 7.53 points to reach 94.34, the lowest in almost two years.

TIER suggests that the uncertainties stemming from U.S. President Donald Trump's tariff threats have cast a shadow over the global economy, potentially curbing demand from end-users. This, in turn, could slow industrial expansion and negatively affect the real estate market.

A March survey revealed that 34.0% of respondents reported improved business conditions, up from 29.5% in February. Conversely, 21.7% reported a decline, a decrease from 23.9% the previous month. These figures indicate a rise in rush orders as international buyers sought to stockpile inventory to evade tariffs.

However, the outlook for the next six months appears less optimistic. Only 19.7% of respondents anticipate business improvements, a significant drop from 35.1% in February, while 29.8% foresee deterioration, a notable increase from 12.6% in February. This shift underscores the manufacturers' growing pessimism fueled by tariff-related uncertainties, according to TIER.

Commenting on the service sector, TIER noted that volatility in the local equity market has made the securities industry cautious, as investors express concerns about potential U.S. retaliation given Taiwan's substantial trade surplus with Washington. In 2024, Taiwan's trade surplus with the U.S. reached US$73.9 billion.

On April 2, Donald Trump announced "reciprocal" tariffs targeting countries with large trade surpluses with the U.S., including Taiwan, which was initially subject to a 32% tariff. The White House later introduced a 90-day pause on these measures, with a 10% duty applied to all countries except China.

Liu Pei-chen (劉佩真), a researcher at TIER's Taiwan Industry Economics Database, pointed out that the local housing market is struggling. Losses in the stock market, geopolitical tensions, and broader economic uncertainties are further pressuring the real estate sector.

Liu suggests a contraction in housing transactions is expected, and price declines may occur in areas with high supply. However, due to factors like high land costs, carbon fee charges, and labor shortages, a significant overall drop in home prices across Taiwan is unlikely.