Tariff deal gives manufacturing a boost

OFF THEY GO: Manufacturing and many other sectors of the economy experienced a substantial kick forward after last month’s deal over US tariffs gave some clarity Taiwan’s manufacturing sector accelerated last month, with the purchasing managers’ index (PMI) rising to 57.2, up 1.9 points from last month and marking a fourth consecutive month of expansion, the Chung-Hua Institution for Economic Research (CIER, 中經院) said yesterday.Momentum was broad-based. Taiwan’s non-manufacturing index (NMI) climbed to 55.3, extending growth in services into this year.The Taipei-based think tank attributed the heating up largely to the conclusion of reciprocal tariff negotiations between Taiwan and the US. Under the agreement, tariffs were lowered to 15 percent and would no longer be stacked on top of most-favored nation rates, while Taiwan secured preferential treatment for semiconductors and semiconductor-related products.“The removal of tariff uncertainty has clearly strengthened confidence,” CIER president Lien Hsien-ming (連賢明) said, adding that current conditions and forward-looking indicators turned positive across most industries. Policy clarity, combined with pre-Lunar New Year restocking, lifted manufacturing activity across the board. All six major manufacturing sectors reported expansion, while the six-month outlook index surged 10 points to 61 — the fastest pace of expansion since March 2022.Electronics and optical products continued to lead gains, underpinned by robust artificial intelligence (AI)-related demand.Taiwan’s AI supply chain has entered a “dual-engine” phase driven by next-generation AI computing products and rising demand for customized AI chips, Lien said.Tight memory supply and rising prices have further amplified demand for advanced wafers, substrates, packaging, power components and memory products, he added. The sector’s PMI climbed to 61.2, while indicators for new orders, order backlogs and the six-month outlook strengthened, pointing to sustained momentum.Supply Management Institute in Taiwan (中華採購與供應管理協會) advisor Jerry Pai (白宗城) described manufacturing conditions as “red-hot,” based on a wave of genuine restocking demand ahead of holidays.Rising new orders, growing backlogs and declining customer inventories signal a healthy, sequential expansion, Pai said. Large buyers are increasingly prioritizing supply chain stability over cost, with contracts focused on avoiding disruptions rather than pushing prices lower, he added.Not all sectors shared the optimism. Basic materials producers remained under pressure, as steel, aluminum and related products continue to face a 50 percent tariff, keeping the sector’s outlook in contraction, CIER said.Services activity strengthened, with the NMI remaining in expansion for an 11th straight month, the institute said.Hospitality, finance, transport and logistics all improved, while construction and real estate returned to expansion on demand for semiconductor and high-end technology facilities, it said.Retail was the only services sector to report a contraction, suggesting domestic consumption remains cautious.