Taiwan’s manufacturing sector last month contracted for a second consecutive month, with the purchasing managers’ index (PMI) slipping to 48, reflecting ongoing caution over trade uncertainties, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
The decline reflects growing caution among companies amid uncertainty surrounding US tariffs, semiconductor duties and automotive import levies, and it is also likely linked to fading front-loading activity, CIER president Lien Hsien-ming (連賢明) said.
“Some clients have started shifting orders to Southeast Asian countries where tariff regimes are already clear,” Lien told a news conference.
Photo: Hsu Tzu-ling, Taipei Times
Firms across the supply chain are also lowering stock levels to mitigate inventory risk, leading to weaker overall activity.
The new orders subindex fell 1.7 points to 45.4, while the production index dropped 1.9 points to 45.1 — both well below the neutral 50-point threshold, the CIER said, adding that tariff and exchange rate uncertainties are prompting a broader sense of caution across the sector.
The concerns deepened after Washington announced a temporary 20 percent tariff on Taiwanese imports — higher than the 15 percent tariffs imposed on products from Japan and South Korea.
Lien said there is widespread worry the rate could become permanent, but he added that such a scenario is unlikely without accompanying conditions on investment, procurement or market access.
“The 20 percent tariff should be viewed as provisional until it is officially confirmed by US President Donald Trump,” he said.
The sharpest deterioration was seen in the electronics and optical components sector, which had previously outperformed. The sector’s new orders index plunged 12.3 points to 43.5, while production fell 13.2 points to 44.5 — the steepest retreat since March last year.
Future sentiment also worsened. The six-month outlook index for the manufacturing sector fell 1.5 points to 38.3, suggesting “extremely poor” visibility for the second half of the year, the CIER said.
For electronics and optical manufacturers, the outlook slid 3.8 points to 40. Semiconductor suppliers also reported declining visibility, with inventory levels pointing to heightened uncertainty ahead, it said.
By contrast, Taiwan’s non-manufacturing index (NMI) stayed in expansion territory for the fifth month in a row, although it edged down 1.5 points to 52.8, a separate survey showed.
Still, tariff pressures, financial market volatility and caution over domestic demand-driven sectors weighed on sentiment, Lien said.
“While domestic demand has not contracted, its growth momentum is relatively limited,” he said.
The six-month outlook for non-manufacturing sectors fell to 40.6, its fifth straight month of contraction and the longest pessimistic stretch in the sector since June 2023.
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