For Taiwan’s small exporters, the uncertainty’s as bad as the tariffs

TAICHUNG, Taiwan – Since President Donald Trump announced his wave of globe-spanning tariffs, Mr Alex Tang has held morning pep talks with the dozen or so workers at his lathe-making factory in central Taiwan, preparing them for rocky times ahead. His business, like all of Taiwan’s export-dependent manufacturers, could be hit hard.

Mr Trump’s

90-day pause on most of the tariffs

gave Taiwan, and much of the world, some breathing space. For now, Taiwan faces a 10 per cent tariff on many of its products, not the 32 per cent Mr Trump had threatened.

The fact that China, Taiwan’s enormous manufacturing rival and would-be ruler, has been hit with tariffs of 145 per cent might look like an opportunity. But that could cause aftershocks of its own for Taiwan’s exporters.

Taiwan needs to be nimble to cope with the new era of disruption in global trade, including the possibility that Mr Trump could raise tariffs again, Mr Tang said. His business, Aegis CNC, does not export directly to the United States, but many customers for its precision manufacturing tools are factories in Taiwan and South-east Asia that do so.

“Some US traders that buy from Taiwan have put on a hold, asked their suppliers to put orders on hold” while they try to figure out what might happen, Mr Tang said in his workshop, a green corrugated shed surrounded by rice fields. “It’s a burden, this uncertainty because of Trump.”

During two days of interviews in central Taiwan, the island’s manufacturing heartland, other business owners echoed that sentiment: The tariffs are one cost, and the uncertainty is another. And they could face a deluge of competition from Chinese exporters, priced out of the US market by tariffs and seeking customers elsewhere. Taiwan’s president, Mr Lai Ching-te, visited the central city of Taichung on April 11 to discuss the tariffs’ effects with manufacturers.

Taiwan is known for its semiconductor plants,

which make the world’s most advanced chips. Those were spared tariffs by Mr Trump because of their importance to US tech companies. But Taiwan, with some 23 million people, also makes plenty of the consumer goods that stock American stores – bicycles, car parts, kitchen appliances, stationery and even lacrosse sticks. It also makes many of the factory-floor machines that create those products, either in Taiwan or elsewhere in Asia.

Many Taiwanese manufacturers are small and medium-size businesses, like Mr Tang’s company, which makes precision lathes that cut, grind and drill lumps of metal or other materials into product parts.

“Taiwanese companies have thrived by remaining small and very frugal, with no debt,” said Ms Alicia García Herrero, the chief economist for Asia Pacific at Natixis, an investment bank. “But often they have not scaled up, and this is very different from the Chinese mainland.”

Taiwanese manufacturers said Mr Trump’s tariffs were just the latest shock they had endured in recent years. Others included the Covid crisis; Europe’s faltering growth, especially after Russia’s invasion of Ukraine; and, perhaps above all, the surge in exports from China.

Most said they could cope with Mr Trump’s 10 per cent tariff on Taiwan. Some predicted opportunity as American importers look for alternatives to China. But many worried that the uncertainty and broader price pressures generated by Mr Trump’s tariffs could drive orders down well beyond the US.

“It’s like a typhoon,” Ms Catherine Yen, a sales manager for Aegis CNC, said of the trade upheavals. She said she had spent her days trying to drum up new orders in the Middle East and elsewhere.

“The eye of the typhoon is the instant impact directly on exports to the United States, but actually there’s also the wider circles from that swirling around us – the upstream and downstream connections – and that’s the scary thing.”

An American flag flies along with a Taiwanese one over Mr Henry Yang’s company in Taichung. The firm exports plumbing products – valves, taps, pipes – to the US, an example of the close bonds that many small Taiwanese exporters have formed with US customers.

Mr Yang, 73, said he sympathised with Mr Trump’s goal of reviving American manufacturing, but wondered how long it would take the US to recruit and train workers for sophisticated, demanding manufacturing jobs. Even in Taiwan, he said, it was getting harder to find young people willing to work in factories. Many Taiwanese plants employ migrant workers from South-east Asia.

“I think that the manufacturer will certainly have to absorb some of it, and the importer will, too,” Mr Yang said of the new 10 per cent tariffs on many Taiwanese products. He said of Mr Trump: “If you ask my personal view, I think he’s got his reasons for doing this, because the United States has been hollowed out.”

Mr Yang is from Lukang, a town known for making plumbing products. He turned that background into a business, filling orders from the US and elsewhere by tapping into a wide network of manufacturers for parts.

That formula has served Taiwan well. For decades, its small and medium-sized manufacturing firms have defied expectations that bigger Chinese competitors would overwhelm them. Instead, they learned to adapt, using their flexibility and their networks to address customers’ needs and developing bonds of trust with buyers abroad.

“Taiwan’s strength lies in doing small orders and lots of choices,” said Mr Jack Lee, chair of 7-Leaders Corp, which makes cutting tools sold by American retailers under a variety of brands. “Mainland China may be catching up and has a few firms that are competitive with us, but what if they get locked out of the United States by the tariffs?”

Taiwan has about 144,000 small and medium-sized businesses in its manufacturing sector, employing about 2 million workers, and they directly account for 12 per cent of the island’s manufactured exports, according to government statistics. But these firms often make parts for bigger Taiwanese exporters, disguising the real scale of their contribution.

“With their highly decentralised, highly flexible production and supply networks, they can supply many different customers. That’s been a main source of their competitiveness,” said Dr Michelle Hsieh, a sociologist at Academia Sinica, a research academy, who studies the role of small Taiwanese firms in making bicycles and other goods. “They’re often talking about providing manufacturing service solutions that are very specific to the customer.”

Taiwanese manufacturers with markets in Europe and elsewhere said they were worried that Chinese competitors would try even more ferociously to undercut them, perhaps helped by state subsidies.

On the other hand, Mr Samuel Hu said companies like his would seek new customers in the US, where Mr Trump’s tariffs could put Chinese imports out of reach. Hu is the president of Astro Tech, a company in central Taiwan that makes high-end e-bikes and bike frames for retailers, mostly in Europe.

“For Taiwanese manufacturers, this is also an opportunity to enter the US market,” Mr Hu said. Some potential US customers contacted him even before Mr Trump’s election, and the number of inquiries is growing, he said. NYTIMES