TAIPEI (Taiwan News) — The Chung-Hua Institution for Economic Research released its seasonally adjusted August purchasing managers’ index on Monday, which fell 0.1% to 47.9%, marking the third consecutive month of contraction.
PMI uses 50% as the boom-bust line, with readings above 50% indicating expansion, while readings below 50% indicate contraction, per CNA.
Economists believe uncertainty brought about by Trump’s tariffs, including a US Court of Appeals ruling that they are illegal, has led to a manufacturing slowdown. Since the tariffs took effect in August, Taiwan has continued with trade negotiations, eager to reduce the current 20% tariff.
Kan Kam-hon (簡錦漢), a researcher at the Institute of Economics, Academia Sinica, said the PMI performed well in the first half of the year, benefiting from a surge in pre-tariff purchases. Now that the surge has subsided, manufacturing is experiencing a “slightly chaotic” situation, with each sector being impacted differently. AI-related businesses continue to perform well, but mature industries, such as the automotive industry, are sluggish.
Kan said a major uncertainty is the recent US Court of Appeals ruling that Trump’s tariffs are an overreach of his use of emergency powers as president. Kan said, regardless of court rulings, Trump may resort to other means to implement his tariff policy.
CIER President Lien Hsien-ming (連賢明) concurred, adding that, regardless of a Supreme Court ruling, given Trump’s personality, a retreat from his tariffs is “absolutely out of the question.”
Lien said Trump would do whatever it takes to continue the tariff war, potentially leading to new challenges in negotiations and another reshuffling of tariff rates. He added that it generally takes three to six months for rising costs to be reflected in prices.
Now that tariffs have taken effect and the increase in pre-tariff imports has faded, PMI will either continue to decline or remain flat in the coming months. Regarding cooling domestic demand, Lien said consumers have postponed car purchases in the hope of price reductions once tariffs are finalized. He recommended government measures to stimulate new auto purchases as quickly as possible.
Wang Jiann-chyuan (王健全), vice president of CIER, said the public should not expect a sharp decline in auto prices as the distribution channel is oligopolistic.
Sean Scanlan
Taiwan News