April business sentiment takes a hit from Trump tariffs, outlook improves

Taipei, May 26 (CNA) Business sentiment in Taiwan weakened further in April due to tariff policies announced by U.S. President Donald Trump on April 2, but economists struck a less pessimistic tone when discussing the data in Taipei on Monday.

Businesses in the manufacturing and service sectors held generally negative views of economic conditions in April, the Taiwan Institute of Economic Research (TIER) said in its monthly report released Monday.

Business confidence was undermined by "frequent policy shifts and uncertainty in the United States," which disrupted "global manufacturing procurement and production schedules," according to TIER.

The manufacturing composite indicator, compiled by TIER using business surveys and model simulations, fell 3.53 points to 90.90 in April -- marking the third consecutive monthly decline and the lowest level since July 2023, TIER said.

The service sector indicator, meanwhile, fell for the fourth straight month to 85.41 -- the lowest level since May 2020.

However, TIER President Chang Chien-yi (張建一) said, "That's all in the past," as he explained the think tank's analysis of Taiwan's economy in April and provided an outlook for the next six months.

Taiwan has posted impressive export growth thanks to strong demand for artificial intelligence (AI) products and front-loaded purchases, Chang said.

After reciprocal tariffs were announced on April 2, Trump abruptly reversed course a week later, announcing a 90-day delay in the full implementation of the tariffs, with a 10 percent tariff applied during that period.

"The 90-day suspension of reciprocal tariffs drove customers to actively stock up," boosting cumulative exports from January to April by 20.62 percent compared to the same period last year, TIER said.

The total trade surplus rose 21.5 percent year-on-year to reach US$30.834 billion during the first four months of the year, according to TIER.

Domestically, Chang expects consumption to pick up once the Legislature allows the central government access to its "frozen budget" and passes a Cabinet bill to spend NT$410 billion (US$13.69 billion) on enhancing Taiwan's resilience and mitigating the impact of U.S. tariffs.

TIER Economic Forecasting Center Director Gordon Sun (孫明德) also said initial projections that the global economy would be hard hit by Trump's trade policies have become less likely, as the U.S. president softened his stance following talks with China and the European Union in May.

TIER's construction sector indicator fell for the fourth straight month to 90.38, the lowest level since December 2020.

Liu Pei-chen (劉佩真), a researcher at TIER's Taiwan Industry Economics Database, said buyers' confidence was further shaken, making it difficult to reverse the housing market's downward correction.