Taiwan’s manufacturing sector showed signs of recovery in May 2025, as the Purchasing Managers’ Index (PMI) rose to 51.0—moving back into expansionary territory after slipping below 50 in April. This rebound is largely attributed to a short-term surge in orders from American and Chinese buyers following a temporary 90-day pause in U.S. tariff increases imposed by President Donald Trump’s administration. While the rebound appears promising, industry experts caution that long-term sustainability remains uncertain.
🔍 Deep-Dive Analysis
PMI: Recovery with Reservations
The Chung-Hua Institution for Economic Research (CIER) reported that the May PMI jumped by 2.1 points from the previous month, climbing back above the neutral 50 mark, which distinguishes expansion from contraction. Key components of the index indicate:
- Production rose to 50.8, up by 3.3 points.
- New Orders increased to 49.1 (still contracting but improving).
- Employment reached 49.3, reflecting improving labor conditions.
- Inventory rose significantly to 53.6.
- Supplier Deliveries remained in expansion at 52.4.
These improvements suggest that manufacturing activity is stabilizing, particularly in high-tech sectors such as electronics, biotech, and electrical equipment.
Orders Surge: Why the Uptick?
The turnaround in May was largely fueled by two interconnected forces:
- 90-Day U.S. Tariff Pause: Trump’s initial announcement of a 32% tariff on Taiwanese goods in April rattled the industry. However, the later decision to pause implementation for 90 days allowed U.S. buyers to place emergency orders with Taiwanese suppliers, creating a short-term spike in demand.
- Chinese Rush Orders: With similar trade concerns looming in China, buyers sought to secure Taiwanese components in advance, bolstering Taiwan’s order books, particularly in the ICT sector.
These factors caused a temporary “restocking rush,” but experts warn it could dissipate quickly.
NMI: Services Sector Shows Resilience
Taiwan’s Non-Manufacturing Index (NMI) also rose to 51.9 in May—marking its third consecutive month in expansion. Notable sub-index movements included:
- Business Activity: Rose 1.9 points to 50.6
- New Orders: Increased 2.5 points to 51.0
- Employment: Held steady at 51.2
- Supplier Deliveries: Declined 1.1 points to 54.6
This suggests continued recovery in consumer-facing sectors such as finance, e-commerce, and hospitality—many of which are closely tied to domestic spending trends.
Sector-Specific Highlights
| Sector | Status | Notes |
|---|---|---|
| Electronics/Optoelectronics | 📈 Expanding | Driven by high global demand for semiconductors |
| Biotech/Chemical | 📈 Expanding | Supported by pharmaceutical exports and R&D growth |
| Electrical Equipment | 📈 Expanding | Surge in industrial automation and EV demand |
| Food/Textiles | 📉 Contracting | Dragged by weak global consumption and raw costs |
| Basic Raw Materials | 📉 Contracting | Hurt by volatile commodity prices |
| Transport Equipment | 📉 Contracting | Reduced capital spending among businesses |
Outlook: Storm Clouds Remain
While May’s performance signals resilience, CIER President Lien Hsien-ming emphasized that manufacturers are still operating under caution. With the six-month manufacturing outlook sub-index rising to 40.9 (up 4.9 points but still contracting), the mood remains pessimistic regarding long-term recovery.
Lien noted that while information and communication technology (ICT) sectors have benefited from the current climate, “old economy” industries—like textiles, metalwork, and transportation—have yet to rebound. The long-term effectiveness of U.S.-Taiwan trade negotiations will be crucial in determining the trajectory of Taiwan’s export-dependent industries.
🤔 FAQs
What does a PMI above 50 indicate?
A PMI above 50 signals that the manufacturing sector is expanding. A number below 50 suggests contraction.
Why did manufacturing rebound in May 2025?
The rebound is attributed to a 90-day U.S. tariff pause, which led to a surge in emergency orders from American and Chinese clients.
Which sectors are performing well?
High-tech sectors like electronics, biotech, and electrical equipment are in expansion, driven by global demand and supply chain realignments.
Are these gains sustainable?
Not entirely. Analysts warn that the boost may be short-lived unless policy clarity and consistent global demand continue into the second half of 2025.
What challenges lie ahead?
Major uncertainties include fluctuating U.S.-Taiwan trade relations, raw material volatility, and geopolitical risks in the Taiwan Strait.
