With U.S.-Taiwan tariff negotiations concluded, manufacturers are broadly optimistic about the business outlook. The Chung-Hua Institution for Economic Research (CIER) released its January 2026 Taiwan Manufacturing PMI on February 2, showing a seasonally adjusted increase of 1.9 percentage points to 57.2%—the fastest expansion since April 2022. The six-month outlook index surged even more dramatically, jumping 10 percentage points to 61%, its highest level since March 2022.
Hsien-Ming Lien, President of the CIER, noted that the rise in the outlook index was “beyond expectations,” indicating that the elimination of tariff uncertainty has had a critical impact on business confidence. All six major manufacturing sectors, including traditional industries, registered expansion.
Improved Tariff Terms as AI and Stockpiling Effects Converge
Under the reciprocal tariff agreement, the U.S. reduced Taiwan’s tariff rate to 15% without stacking it atop the Most Favored Nation (MFN) rates. Taiwan also secured preferential treatment under Section 232 for semiconductors and semiconductor derivatives, as well as auto parts and lumber, effectively reducing export costs and policy uncertainty.
Shin-Hui Chen, an Associate Research Fellow in CIER’s Third Research Division (Taiwanese Economy), explained that while orders and production require time to materialize, the January survey already detected pre-Lunar New Year stockpiling and inventory replenishment—markedly different from simple inventory adjustments in the past. With AI’s “dual-engine” demand continuing to expand, a medium- to long-term trend is gradually taking shape.
On the non-manufacturing side, the January Non-Manufacturing Index (NMI), unadjusted for seasonality, rose to 55.3%, marking its 11th consecutive month of expansion. The six-month outlook index also climbed to 56.3%, returning to expansion for the first time since last March. Chen attributed the improvement to the peak domestic demand season, spillover effects from manufacturing, and stronger performance in equities and financial services.
Strategic Implications Emerge: Taiwan Positioned Alongside Europe, Japan, and Korea
Shu-Fei Yang, Deputy Director of CIER’s Regional Development Study Center, emphasized that the negotiations delivered not just tariff advantages but, more importantly, confirmed Taiwan’s strategic value to the United States as being on par with the European Union, Japan, and South Korea. Compared to Japan’s capital-provider approach and Korea’s hybrid model, Taiwan’s enterprise-led cooperation framework offers greater autonomy and more manageable financial and governance risks.
Yang emphasized that Taiwan has successfully reached an outcome similar to a free trade agreement (FTA). The average reciprocal tariff levels are comparable to those of the U.K. and in line with South Korea, giving Taiwan at least a five-percentage-point advantage over China and most Southeast Asian countries. This background provides clarity on China’s strong objections that emerged after the announcement of the negotiation results.
Author: CIER Editorial Team
Date: February 3, 2026