The Chung-Hua Institution for Economic Research has reported that the seasonally adjusted Purchasing Managers' Index (PMI) for the manufacturing sector dropped by 5.3 percentage points to 48.9% in April, ending a two-month expansion phase and moving into contraction. The institute noted that the US's reciprocal tariff policy has alarmed manufacturers, resulting in the largest decline in future outlook since February 2020.

The PMI uses 50% as the threshold for distinguishing between expansion and contraction; values above 50% indicate growth, while those below signify contraction. CIER president Lian Hsien-Ming indicated that the PMIs decline to 48.9% is primarily due to significant drops in new orders and production indices. Additionally, it has been observed that US tariff policies are impacting manufacturers' future outlooks.

Before the announcement of the reciprocal tariffs by the US, manufacturers had already shown signs of inventory accumulation in the first three months of the year. The April PMI data does not reflect pessimism compared to March, but indicates a more conservative stance from manufacturers. The next 90 days of the adjustment period will pose variables regarding how tariffs will be negotiated with foreign manufacturers.

CIER associate researcher Chen Hsin-Hui noted that employment is a lagging indicator, but the manufacturing sector has shown stable hiring trends. Bai Zong-Cheng, an advisor at the Chinese Institute of Procurement and Supply Management, added that while many electronics firms are increasing investments in the US, Taiwanese manufacturers are proceeding cautiously, often establishing small offices and pilot production lines before committing significant resources, given the volatility of tariff measures.

Furthermore, CIER reported that the unadjusted Non-Manufacturing Index (NMI) for April has expanded for two consecutive months, although it fell by 2.8 percentage points to 51%. Business activity and the new orders index have both turned contractionary, with the six-month outlook index plummeting by 19.7 percentage points to 29.1%, reflecting the fastest contraction since May 2020.

Concerning the recent surge of the New Taiwan Dollar, Bai Zong-Cheng explained that companies generally adjust agreements if the exchange rate changes by more than 3%. However, small and medium enterprises may find it difficult to hedge against such fluctuations. Chen Hsin-Hui also mentioned that some manufacturers are indeed concerned about exchange rate issues affecting exports, particularly traditional industries and raw materials suppliers who may lack bargaining power and face significant impacts if they receive payments for goods only upon arrival at port.