Taipei: Taiwan's manufacturing activity experienced a significant contraction in April, putting an end to a two-month expansion streak, as reported by the Chung-Hua Institution for Economic Research (CIER) on Friday. The contraction is attributed to tariff policies under U.S. President Donald Trump.
According to Focus Taiwan, data from CIER, a prominent economic think tank in Taiwan, indicated that the local purchasing managers' index (PMI), which evaluates the manufacturing sector's fundamentals, dropped by 5.3 points from the previous month to 48.9 in April. In contrast, the non-manufacturing index (NMI) for the service sector also decreased by 2.8 points to 51.0 in April, yet remained in expansion for the second consecutive month.
The PMI and NMI readings suggest that a figure above 50 indicates expansion, while a reading below 50 denotes contraction. In April, all five major components of the PMI experienced declines. Sub-indexes for new orders, production, employment, supplier deliveries, and inventories fell to 47.5, 47.5, 46.6, 52.7, and 50.1, respectively. Among these, only supplier deliveries and inventories remained in expansion.
Additionally, the sub-index for business outlook over the next six months plummeted by 23.1 points to 36.0, marking its lowest point since the onset of the COVID-19 pandemic in early 2020, according to CIER.
At a news conference, CIER President Lien Hsien-ming noted that the sharp decline in new orders and production contributed to the significant drop in the April PMI, exacerbated by concerns over tariffs. These concerns also negatively impacted the business outlook for the next six months.
In early April, President Trump announced sweeping "reciprocal" tariffs, including a 32 percent import duty on goods from Taiwan, before announcing a 90-day pause to allow for negotiations. This pause is expected to introduce further uncertainties for local exporters, Lien added.
Across various industries, sub-indexes for electronics and optoelectronics, food and textile, basic raw material, transportation equipment, chemical and biotech, and electricity and electric equipment all trended lower from the previous month. However, only the electronics and optoelectronics, food and textile, and electricity and electric equipment industries remained in expansion, CIER noted.
In the service sector, the sub-indexes for business activity, new orders, and employment decreased to 48.7, 48.5, and 51.2, respectively, with employment still remaining in expansion. Conversely, the supplier delivery sub-index rose to 55.7, continuing its expansion trend.
The sub-index for business outlook in the service sector for the next six months fell by 19.7 points to 29.1 in April, its lowest since May 2020, CIER reported.
CIER economist Chen Hsin-hui commented on the stronger Taiwan dollar against the U.S. dollar, suggesting that large exporters may possess greater bargaining power to negotiate with clients and mitigate foreign exchange impacts. However, smaller exporters, especially in traditional industries, may face increased challenges with currency volatility.
On Friday, the U.S. dollar closed down NT$0.953 or 3.07 percent at NT$31.064 against the Taiwan dollar, marking its lowest since January 9, 2024, and the steepest single-session decline for the greenback since 2002, driven by significant fund inflows and a robust equity market.