Taipei: The U.S. tariff policies are expected to hurt Taiwan’s old economy industries more than their tech counterparts as it is harder for the traditional industrial sector to relocate production to the American market to avoid the tariffs, according to economics experts. Speaking with reporters on Friday, Wang Jiann-chyuan, vice president of the Chung-Hua Institution for Economic Research (CIER), emphasized the challenges faced by these industries in the wake of the Trump administration’s tariff policies, which aim to encourage manufacturers to relocate their investments to the U.S. and produce made-in-U.S. goods.
According to Focus Taiwan, Wang highlighted that not all local industries can afford to move to the U.S. “Old economy industries simply cannot avoid high tariffs imposed by the Trump administration and will bear the brunt of the levy as they will not have efficient U.S. investments,” Wang stated. He explained that industries prepared to move to the U.S. require a high gross margin to cushion the increased product costs and must possess advanced automation to address the labor shortage in the U.S.
Wang further noted that industries need to establish a cluster and develop a comprehensive supply chain in the U.S. market, with investments tailored to meet client demands. He pointed out that high-tech industries in Taiwan, such as chip makers, IC packaging and testing providers, and artificial intelligence suppliers, are better positioned to move to the U.S., whereas many traditional industries will lag behind.
On Thursday, the White House announced a 20 percent blanket tariff on Taiwan, down from the 32 percent unveiled earlier in April. The Taiwan government expressed that the 20 percent tariff is provisional and is seeking a lower levy through further negotiations with the U.S. Unlike technology giant Taiwan Semiconductor Manufacturing Co. (TSMC), which is investing substantially in Arizona and boasts a high gross margin, many old economy companies operate on much lower margins, making relocation financially unfeasible.
Wang noted that since 2022, many traditional industries have invested in Southeast Asia as part of the “Taiwan plus one” initiative. However, these countries also face similar U.S. tariffs, making further investments there less cost-efficient for Taiwanese firms. The tariffs for Vietnam, Thailand, and Cambodia are at similar levels to Taiwan, around 20 percent.
Besides the U.S. tariffs, traditional Taiwanese manufacturers face additional challenges such as building an industrial cluster and addressing labor and electricity issues in Southeast Asia. They also have to contend with the impact of a stronger Taiwan dollar, which has risen 9.18 percent against the U.S. dollar since the beginning of the year.
Echoing Wang’s sentiments, Pai Tsung-cheng, head of the Supply Management Institute, Taiwan, warned that many traditional industries, already in trouble, are expected to deteriorate further due to tariff impacts and foreign exchange losses. Pai cited the fastener industry, noting that the low profit margins have led many manufacturers to give up, despite their critical role in various product manufacturing processes.
Pai urged the government not to overlook traditional industries, such as hand machines, machine tools, and metal parts makers, which are likely to be severely affected by the tariffs. The potential collapse of these firms could disrupt the supply chain significantly without adequate assistance.