Manufacturing sector stays in contraction for 3rd straight month

Taipei, Sept. 2 (CNA) Taiwan's manufacturing sector contracted for the third consecutive month in July, pressured by U.S. tariff policies and a stronger Taiwan dollar, the Taiwan Institute of Economic Research (TIER) said Tuesday.

TIER's composite index for the sector fell 1.38 points from a month earlier to 8.48 in July, flashing a "blue" light that signals contraction at 10.5 points or below.

The think tank uses a five-color system to assess activity, with red indicating overheating, yellow-red fast growth, green stable growth, yellow-blue sluggish growth, and blue contraction.

TIER said the Trump administration's tariff measures, including a 20 percent levy on Taiwan effective Aug. 7, are expected to push up import prices, worsen inflation, and hurt employment in the United States, creating further global economic uncertainty. The appreciation of the Taiwan dollar has also squeezed local exporters' margins, it added.

Meanwhile, a Section 232 investigation launched by Washington in April under the Trade Expansion Act of 1962 could pave the way for tariffs on semiconductors, creating more uncertainty for Taiwan's tech industries.

In July, high-tech industries such as electronics component and information and communications suppliers continued to benefit from strong demand for emerging technologies, but traditional sectors faced headwinds from fragile global demand, TIER said.

Of the five subindexes in the July report, four fell from a month earlier: demand (down 0.69), pricing (0.35), business climate (0.22) and investment (0.15). Only the cost subindex edged up 0.03.

In a July survey, 87.86 percent of respondents in the sector reported "blue light" conditions, up from 66.76 percent in June, while just 4.48 percent reported "green light" growth, down from 14.17 percent.

By industry, the electronics component sector flashed a yellow-blue light, supported by AI demand but dampened by concerns over possible U.S. semiconductor tariffs. The base metal industry continued to show contraction amid weak demand in the U.S. and Europe.

The auto and auto parts industry also flashed blue, with sales falling 22.3 percent year-on-year in July as consumers delayed purchases until potential tariffs on U.S.-made cars are finalized.