TAIPEI (Taiwan News) — A strong Taiwan dollar has triggered the country’s first manufacturing recession signal in 15 months, dampening export competitiveness, the Taiwan Institute of Economic Research reported Tuesday.
The institute’s manufacturing business climate indicator fell to a blue signal for May, indicating a contracting economy, per CNA. Even though US-China tariff risks have eased, the Taiwan dollar’s sharp appreciation widened the gap between it and the US dollar terms.
TIER noted that while global tariff tensions calmed in mid-May, manufacturing purchasing managers indices in the US, Japan, and China remained in contraction. Domestically, a stronger Taiwan dollar squeezed year-on-year growth for export orders, pulling down demand and pricing indicators.
May’s manufacturing signal score fell to 9.88 points, a drop of nearly 2 points from April, pushing the indicator into recession territory for the first time since February last year. Optimism among manufacturers also shrank as the currency’s appreciation and tariff uncertainties took effect.
Even the computer and electronics sectors saw headwinds. Although demand for AI and audiovisual products stayed steady, a stronger Taiwan dollar dragged down export prices for two consecutive months, softening the sector’s indicator from growth to steady.
Looking ahead, TIER warned that domestic retail sales and the housing market remain under pressure, while global instability could push oil prices higher, stoking new inflation risks. The softer US dollar has also made Asian currencies relatively stronger, dampening Taiwan’s price competitiveness in key export markets.
TIER expects Taiwan’s manufacturers to face greater challenges in the second half of the year. It suggested the government monitor exports and global trends to manage risks.
