Manufacturing sector weakens sharply amid Trump tariff threat

Taipei, April 30 (CNA) An index gauging Taiwan's manufacturing sector weakened significantly in March, hurt by the economic uncertainty created by U.S. President Donald Trump's tariff threats, the Taiwan Institute of Economic Research (TIER) said Wednesday.

The TIER's economic composite index, which gauges the manufacturing sector's health, fell sharply by 4.54 points from a month earlier to 12.12 in March, to flash a "yellow-blue" light, indicating sluggish growth.

That compared with a "yellow-red" light seen in February and a yellow-blue light in January, the TIER said.

TIER uses a five-color system to assess economic activity in the sector, with "red" indicating overheating, "yellow-red" showing fast growth, "green" representing stable growth, "yellow-blue" signaling sluggish growth, and "blue" meaning contraction.

The think tank said Trump's unpredictability in repeatedly adjusting his tariff policies had driven up risks to global trade.

He first announced sweeping "reciprocal" tariffs on April 2 on countries that have higher trade surpluses with Washington, including a 32 percent import duty on goods from Taiwan, before announcing a 90-day pause a week later.

Growth and activity has shown signs of moderating in the local information and communications and electronics component sectors, which continue to enjoy strong global demand for emerging technologies, boosting industrial production, the TIER said.

Trump's tariff policies have also sent ripples through stock markets, hurting sentiment among manufacturers, the TIER said.

Among the five factors comprising the March composite index, the sub-indexes on demand, the general business climate, purchases of raw materials, and pricing moved lower by 2.40, 1.15, 0.87 and 0.15, respectively, from a month earlier, the TIER said.

Only the sub-index on costs bucked the downtrend, up 0.02 from a month earlier in March, the TIER said.

By sector, the TIER said, the electronics component and computer/ optoelectronics sectors flashed a green light in March, retreating from a red light in February as growth slowed down amid tariff uncertainties.

The base metal industry felt the pinch of a weak global steel market and a decline in orders from Europe and China to flash a blue light in March, compared with a yellow-blue light in February, the TIER said.

Though semiconductor suppliers increased their demand for equipment in March, the machinery industry showed signs of slowing down, flashing a green light in March after shining a red light in February as China pushed for domestic products to replace imported items, the TIER said.

Looking ahead, the TIER said, risks in global trade are expected to increase amid Trump's tariff policies, and the uncertainties that exist will affect business confidence worldwide and influence expansion strategies in global supply chains.

Those trends, in turn, could negatively affect the strength of the local manufacturing sector, the TIER said.

Also, Trump has threatened to impose tariffs on semiconductors. Those potential tariffs combined with U.S. sanctions on chip exports to China could force Taiwan's high-tech sectors to face new challenges, the TIER cautioned.