For Taiwan’s Small Exporters, the Uncertainty’s as Bad as the Tariffs

Following President Trump’s announcement of widespread tariffs, Alex Tang has been conducting morning pep talks with the workers at his lathe-making factory in central Taiwan, preparing them for challenging times ahead. His business, like many of Taiwan’s export-dependent manufacturers, could face significant impacts.

The 90-day pause on most tariffs by Mr. Trump provided Taiwan, and other nations, with some relief. Currently, Taiwan is dealing with a 10 percent tariff on many products, instead of the 32 percent initially threatened. While China, Taiwan’s manufacturing competitor, is facing tariffs of 145 percent, this situation could potentially create challenges for Taiwan’s exporters.

Mr. Tang emphasized the need for Taiwan to be adaptable in the face of the evolving global trade landscape, including the possibility of Mr. Trump reinstating higher tariffs. Although Aegis CNC, his business, does not directly export to the United States, many of its customers who purchase precision manufacturing tools are factories in Taiwan and Southeast Asia that do.

“Some U.S. traders that buy from Taiwan have put orders on hold while they navigate the uncertainties caused by Trump’s actions,” Mr. Tang stated at his workshop in the midst of rice fields. “This uncertainty due to Trump is burdensome.”

During interviews in central Taiwan, other business owners echoed similar concerns. The tariffs present one challenge, while the overall uncertainty poses another. There is also the potential threat of increased competition from Chinese exporters looking for new markets due to U.S. tariffs.

Taiwan, known for its semiconductor plants, which produce advanced chips, was spared from tariffs by Mr. Trump due to their significance to U.S. tech companies. However, Taiwan also manufactures various consumer goods that are commonly found in American stores, such as bicycles, car parts, kitchen appliances, and more. The island also produces many of the machines used in the manufacturing process, either domestically or in other parts of Asia.

Many Taiwanese manufacturers, like Mr. Tang’s company, are small and medium-sized businesses that specialize in producing precision machinery.

Alicia García Herrero, the chief economist for Asia Pacific at Natixis, highlighted that Taiwanese companies have thrived by staying small, frugal, and debt-free. However, they may face challenges from various shocks in recent years, including Mr. Trump’s tariffs, the Covid crisis, and increased competition from China.

While some Taiwanese manufacturers see opportunities in the current trade environment, many are concerned about the broader impacts of the tariffs and the uncertainty they bring. The trade disruptions are likened to a typhoon, with potential repercussions beyond just the immediate impact on U.S. exports.

Henry Yang’s company in Taichung exports plumbing products to the United States, showcasing the close ties that many small Taiwanese exporters have with U.S. customers.

Mr. Yang expressed understanding for Mr. Trump’s goal of revitalizing American manufacturing but raised concerns about the challenges in recruiting and training workers for such roles. He also noted the difficulty in finding young people willing to work in factories, even in Taiwan.

Regarding the new tariffs on Taiwanese products, Mr. Yang emphasized the need for both manufacturers and importers to absorb some of the impact. He acknowledged Mr. Trump’s motivations behind the tariffs, citing concerns about the hollowing out of the United States’ manufacturing sector.

At 73 years old, Mr. Yang, originally from Lukang, has turned his background in plumbing product manufacturing into a successful business, catering to orders from the United States and other regions by leveraging a vast network of manufacturers for components.

Taiwan’s small and medium-sized manufacturing firms have defied expectations of being overtaken by larger Chinese competitors by focusing on adaptability, flexibility, and building strong customer relationships.

Jack Lee, the chairman of 7-Leaders Corp., highlighted Taiwan’s strengths in fulfilling small orders and offering a wide range of choices to customers. While Chinese firms may be competitive, potential U.S. tariffs could impact their access to the American market, creating opportunities for Taiwanese manufacturers.

Taiwan has a significant number of small and medium-sized manufacturing businesses that contribute significantly to the island’s exports. These firms often supply parts to larger exporters, showcasing the complex and interconnected nature of Taiwan’s manufacturing sector.

With their decentralized and flexible production networks, these Taiwanese manufacturers have a competitive edge in providing tailored manufacturing solutions to customers, enhancing their overall competitiveness.

Taiwanese manufacturers with markets in Europe and beyond are concerned about increased competition from Chinese counterparts, potentially backed by state subsidies. However, there are also opportunities for Taiwanese companies to explore new markets, such as the United States, where Chinese imports may be impacted by tariffs.

Samuel Hu, the president of Astro Tech, a company specializing in high-end e-bikes and bike frames, sees potential in entering the U.S. market amidst the changing trade landscape. The company has already received inquiries from potential U.S. customers, indicating a growing interest in Taiwanese products.