Taiwan’s manufacturing purchasing managers’ index (PMI) last month fell 2.1 percent to 48.7, ending two months of expansion weighed by the effect of the Lunar New Year holiday and uncertainty linked to the US’ potential tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
However, the reading on the six-month business outlook gained 5.6 points back into growth mode at 51.7, encouraged by China’s stimulus measure for purchases of smartphones, tablets and wearables.
“Taiwan should come up with measures to address its trade surpluses with the US, which amounted to US$70 billion last year, a 50 percent spike from a year earlier,” CIER president Lien Hsien-ming (連賢明) said.
Photo: Peter Lo, Taipei Times
US President Donald Trump has reiterated his displeasure with the US’ trade imbalances with other countries and has threated to impose tariffs of up to 100 percent on semiconductors, Lien said.
It is unclear if Trump would levy tariffs on advanced chips or all chips and whether he is targeting consumer products or intermediate goods, he said.
Tariffs on intermediate goods would harm Taiwanese firms, because many make electronic components used in artificial intelligence systems, smartphones, notebook computers and other technology applications, Lien said.
The critical sub-index on new business orders shed 1.2 points to 49.7, while the gauge on industrial production tumbled 7.1 points to 45, the Taipei-based think tank found.
PMI measures seek to capture the manufacturing industry’s health, with scores of 50 and higher indicating expansion and values below the threshold suggesting contraction.
The latest retreat had much to do with the week-long Lunar New Year holiday, Lien said.
Likewise, the measure on inventories added an insignificant 0.8 points to 46.5, while customers’ inventories lost 0.9 points to 45.3, both reflecting a conservative business approach, the CIER said.
Whatever the final tariff outcome is, Taiwan should be braced for unfavorable trade terms under the Trump administration, Lien said.
Nevertheless, local firms displayed positive views about their business six months forward after China introduced a 15 percent subsidy for purchases of consumer technology products, the institute said.
The positive outlook came also because the survey took place before Trump announced 25 percent tariffs on imports from Canada and Mexico, it said, adding that the US is set to raise tariffs on steel imports later this month.
The PMI survey this month might shed a different light on the industry’s business sentiment, Lien said.
The non-manufacturing PMI last month weakened 1.5 points to 55, staying in expansion mode for the 27th consecutive month, as the holiday season provided a boost to all service sectors despite rising operating costs and service charges, the institute said.
Non-manufacturers are looking at a business slowdown, given the six-month business outlook gauge softened 0.9 points to 49.6, the first contraction sign since November 2023, with the poor sentiment showing among retailers, wholesale operators and real-estate brokers, it said.
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