As 2025 comes to a close, the overall economic situation has become clearer in the second half of the year, compared to the heightened anxiety over tariffs, inflation, and exchange rate impacts experienced during the first half. The Chung-Hua Institution for Economic Research (CIER) published its Taiwan Purchasing Managers’ Index (PMI) business outlook survey for the second half of 2025 on December 23. The survey reveals that while the manufacturing sector is still in contraction territory, there has been significant improvement, and businesses are increasingly optimistic about their operations for 2026.
The survey shows that the manufacturing sector’s operating conditions index for the second half of 2025 stood at 49.8%, remaining below the 50 threshold for two consecutive periods but rising significantly from the first half and exceeding prior expectations. Looking ahead to the first half of 2026, manufacturing operating conditions are expected to shift to expansion, with the index reaching 56.6%. In the non-manufacturing sector, the operating conditions index has shown consistent growth, expanding for five consecutive periods. It rose to 61.7% in the second half, surpassing expectations and signaling robust support from both domestic demand and service activities.
Shin-Hui Chen, an Associate Research Fellow at the Third Research (Taiwanese Economy) Division of the CIER, pointed out that tariffs, exchange rate volatility, and geopolitical uncertainties have been clearly reflected in corporate cost structures since the second half of 2025. The manufacturing sector’s purchasing price index has maintained an upward trajectory for four consecutive periods, rapidly climbing to 60. Companies anticipate that purchasing prices will continue to rise, reaching 61.6% in the first half of 2026. As a result, they plan to adjust selling prices accordingly, with an expected average increase of about 1.82%. This strategic pricing adjustment is expected to help profit margins shift from contraction to expansion.
The non-manufacturing sector is also experiencing rising cost pressures, particularly due to significant wage increases. However, with upward adjustments in service fees, profit margins have begun to expand in the second half of this year. They are anticipated to continue growing into the first half of 2026.
Regarding tariff impacts, approximately 50% of manufacturers sell products directly to the United States, yet over 60% of businesses still face reciprocal tariffs because U.S.-origin content falls short of thresholds. Overall, 44.4% of manufacturers report that tariffs have or will impact revenue. Cost-sharing mechanisms between companies and customers are gradually taking shape, but actual burden ratios still depend on product customization and pass-through capabilities.
Author: CIER Editorial Team
Date: December 23, 2025