The economic fallout from the renewed U.S. tariff measures under President Donald Trump’s April 2025 trade policy has begun to ripple through Taiwan’s export-dependent manufacturing sector. According to Taiwan’s Ministry of Labor, three Taiwanese firms have initiated furlough or unpaid leave programs, impacting between 200 to 300 employees.
This move marks one of the first direct labor market reactions to the tariff shocks, particularly from small and mid-sized manufacturers reliant on U.S. markets. Two of the three companies, newly added to the Ministry of Labor’s furlough registry, are from the manufacturing sector – specifically, those producing electric outlets and automotive hardware components.
What’s Happening?
The Ministry of Labor confirmed on Thursday that three firms have recently applied for or updated unpaid leave programs. The cause, cited by all three, is the immediate decline in export orders following the announcement of U.S. tariff hikes on Taiwanese goods – a policy reintroduced by the Trump administration as part of broader protectionist measures targeting Asia-based supply chains.
As of the end of April, 2,266 workers from 131 companies are now on unpaid leave, reflecting a jump of 584 individuals and 21 companies from March. While this represents a monthly increase, officials noted it is still the lowest number for April in six years, pointing to some resilience in Taiwan’s overall labor market.
Original Insights and Broader Impact
While the numbers may seem modest in scale, the trend is notable for what it signals about Taiwan’s industrial exposure. The companies affected are not tech giants like TSMC, but smaller manufacturers who serve as critical nodes in the global supply chain.
These firms often operate with thinner profit margins and are more vulnerable to demand-side shocks caused by trade policy changes. Many of these manufacturers export components that are integrated into larger products assembled in North America. With U.S. tariffs making these products more expensive, purchase orders have begun slowing – prompting these employers to initiate furloughs to cut costs without committing to full layoffs.
Economists warn that this could be the early stages of a broader impact if trade tensions between the U.S. and China (and by extension, Taiwan) continue. Taiwan’s reliance on intermediate goods exports makes it particularly sensitive to changes in global trade patterns.
Government Response
Officials have said the Ministry of Economic Affairs is closely monitoring the situation. It is considering expanding support for affected firms through short-term employment subsidies and export diversification incentives, particularly for small manufacturers.
Taiwan is also accelerating trade talks with European and Southeast Asian nations to reduce dependency on U.S. markets, which accounted for over 13% of Taiwan’s total exports in 2024.
FAQs
Why are Taiwanese firms affected by U.S. tariffs?
Many Taiwanese manufacturers export goods or components to the U.S. market. When tariffs increase, demand for these exports drops, hurting revenue and forcing firms to cut costs, often through furloughs.
Which sectors are impacted the most?
The manufacturing sector, especially small- to mid-sized companies making hardware tools, electrical components, and auto parts.
What is unpaid leave or furlough in Taiwan?
It’s a temporary leave from work without pay. Employers use it to retain workers during downturns instead of laying them off.
Is this the start of a recession?
Not necessarily. The labor ministry notes overall furlough numbers are still relatively low. However, prolonged trade tensions could increase risks.
What is the government doing about it?
Authorities are reviewing options such as wage subsidies and helping companies explore new export markets.
