Tue, Apr 22, 2025 page8

• EDITORIAL: Help is needed for Taiwan’s SMEs

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  The Executive Yuan has proposed allocating NT$88 billion (US$2.71 billion) through a special budget — subject to legislative approval — to support Taiwan’s industrial and agricultural sectors impacted by US President Donald Trump’s new tariff policy.

  The funds would be distributed by the Ministry of Economic Affairs, the Ministry of Finance, the Ministry of Labor, the Ministry of Agriculture and other agencies. These agencies plan to implement 20 support measures across nine key areas, with detailed application procedures, eligibility criteria and program specifics to be announced by the Cabinet later this week.

  While larger corporations have the capability to cope with the unprecedented pressure from US tariffs and global economic uncertainty, small and medium-sized enterprises (SMEs) face existential threats.

  These firms account for more than 90 percent of Taiwanese businesses and employ nearly 80 percent of the workforce, and have long been the unsung heroes of Taiwan’s economic progress.

  However, with the global supply chain shifting from a model of “high efficiency” to one of “high resilience” in response to escalating geopolitical tensions, Taiwanese SMEs must confront daunting but crucial challenges to adapt and endure.

  From machine tool makers in Taichung, plumbing fixture suppliers in Changhua County, screw producers in Tainan and Kaohsiung, machinery providers in New Taipei City, and server makers in Taoyuan, the nation’s six largest manufacturing clusters — most of them composed of SMEs — have a total export value of more than NT$1.3 trillion to the US per year.

  If the US implements the 32 percent “reciprocal” tariff on Taiwanese goods, it would directly impact more than 200,000 workers and the livelihoods of millions of people, the Chinese-language CommonWealth Magazine reported last week.

  In the National Development Council’s analysis of the potential impact of the US’ 32 percent tariffs, it predicted that Taiwan would see a drop of 26 percent in industrial exports to the US and that the local manufacturing sector is likely to report a 5 percent drop in production value in the near term.

  Over the longer term, the import duty would also likely lead Taiwanese manufacturers to relocate their factories to Mexico and other countries, impacting Taiwan’s production capacity and hurting domestic employment, the council said last week.

  However, SMEs face cash flow risks and potential credit tightening amid economic uncertainty, a weak yen, slowing Chinese and European demand, local labor shortages and rising energy costs — making timely support essential.

  Notwithstanding the government’s proposed relief measures and further tariff negotiations with the US, low-profit industries no longer have room to survive in Taiwan. That is because under a tariff war, the international market would become more competitive, and questions have risen about whether the business model of depending on gross margins of 3 to 4 percent would continue to work for SMEs.

  In this regard, the government should offer incentives for firms to invest in innovation, such as the use of artificial intelligence and automation in factories, and assist them in moving up the global manufacturing value chain through research and development.

  To boost the global competitiveness of Taiwanese SMEs, the government should allocate additional funding to help businesses diversify their export destinations and expand into new markets, especially as the US-China rivalry is expected to persist for the next five to 10 years.

  During Trump’s first tariff war in 2018, Taiwanese firms were forced to pursue a “China Plus One” strategy to reduce reliance on Chinese manufacturing.

  In his second term, supply chain diversification would remain critical — but SMEs must also seek new customers beyond the US.
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