TAIPEI (Global Views Monthly/TVBS News) — Taiwan's machine tool industry experienced an unprecedented chill as summer heat lingered. The United States' imposition of a 20 percent reciprocal tariff on Taiwanese machine tools has unleashed an export crisis. Leading manufacturer Takisawa Taiwan (瀧澤科) has already announced a four-day work week to address shrinking orders and cost pressures, initiating what appears to be an industry-wide "reduced hours" survival strategy.
Financial reports underscore the severity of the situation: substantial foreign exchange losses have eroded profits at major companies like Takisawa and Hiwin (上銀), while numerous mid-tier manufacturers are also reporting losses. Data from the Taiwan Machine Tool & Accessory Builders' Association (TMBA, 工具機暨零組件工業同業公會) shows July exports plummeting by more than 10 percent, as the industry confronts a triple challenge of frozen exports, mounting foreign exchange losses and production adjustments. Taiwan's Chinese National Federation of Industries (CNFI, 全國工業總會) has described this as the most challenging battle in four decades, offering recommendations to prevent industrial exodus and rising unemployment.
While August temperatures consistently exceeded 30 degrees Celsius (86°F), Taiwan's machine tool industry has been struck by an unprecedented cold front, leaving companies shivering. This stems from the United States imposing up to 20 percent "reciprocal tariffs" on Taiwan. Though negotiations remain incomplete, the machine tool industry, which depends heavily on exports for survival, is undeniably struggling.
The consequences soon became apparent when major machine tool manufacturer Takisawa Taiwan announced that beginning Aug. 22 , all Fridays would become scheduled days off, effectively implementing a four-day work week under the name of an "operational efficiency optimization plan" to adjust production rhythms. The company emphasized that this measure not only provides employees with extended weekends but also maintains management flexibility as orders decline, helping to preserve operational equilibrium.
Despite these efforts, the numbers revealed in financial reports expose the company's operational struggles. While the core business managed a slight profit of NT$29 million (around US$945,000) in the second quarter, foreign exchange losses completely devoured these gains, resulting in a quarterly net loss of NT$72 million (around US$2.35 million) after taxes and a first-half loss per share of NT$0.74 (around US$0.024).
Squeezed between tariffs and exchange rates, Takisawa isn't alone in teetering on the edge of profitability. Industry leader Hiwin has fallen into similar difficulties, with enormous second-quarter foreign exchange losses reaching NT$422 million (around US$13.75 million), which consumed nearly half of its core business profits. This caused earnings per share to plunge from NT$1.65 (around US$0.054) in the first quarter to just NT$0.38 (around US$0.012).
Other established manufacturers have not escaped the fallout. Awea Mechantronic (亞崴) reported losses of NT$66 million (around US$2.15 million) in the first half. Quaser (百德) lost NT$42 million (around US$1.37 million). Honor Seiki Taiwan (榮田), despite first-half profits, slipped into second-quarter losses due to foreign exxchange losses. Many industry players admit that rushing shipments before the 90-day tariff grace period proved insufficient against the "double-kill effect" of implemented tariffs and the strengthening Taiwan dollar.
TMBA statistics reveal that July exports totaled just US$164 million (around NT$5.03 billion), representing a sharp 15 percent decline from the previous month and an 8.4 percent year-over-year decrease. Cumulative exports from January through July reached US$1.174 billion (around NT$36.02 billion), down 6.3 percent from the previous year. Metal-cutting machines declined by 8 percent, and while metal-forming machines managed a counter-trend growth of 2.2 percent, this was insufficient to reverse the overall downturn.
The CNFI has presented three major recommendations concerning high U.S. tariffs on Taiwanese machine tools. First, regarding exchange rate policy, they note the recent continuous appreciation of the New Taiwan dollar has outpaced both the Japanese yen and Korean won, significantly undermining export competitiveness. The federation suggests the government should maintain exchange rate stability and advocate for at least a 10 percent depreciation to offset tariff disadvantages for U.S. exports while expanding into emerging markets beyond America.
Second, on the financing front, while there are already enhanced loan and guarantee measures for small and medium-sized enterprises, the widespread impact necessitates further action. The federation calls for expanding the credit guarantee fund, increasing guarantee capacity and relaxing loan conditions to ensure small and medium-sized enterprises can access sufficient capital to weather these challenges.
Third, confronting the business operational pressures brought by this "tariff tsunami," the federation proposes three emergency measures: freezing electricity price increases, postponing carbon fees and expanding relief guidance to reduce cost burdens and stabilize employment. The federation emphasizes that without timely policy support, Taiwan risks industry relocation and waves of unemployment, which would inflict long-term damage on the island's overall economy.
Investment consultant analyst Tsai Ming-chang (蔡明彰) explained on his YouTube channel that following the U.S. imposition of a 20 percent tariff, the total tax rate for Taiwanese machine tools exported to America could reach 24.7 percent. This significantly exceeds Japan's approximately 15 percent. Coupled with the relatively stable Japanese yen, Taiwanese manufacturers face an even greater exchange rate disadvantage. If the second half fully reflects these tariff impacts, financial reports could become more devastating, making stock price optimism difficult.
However, he also noted that opportunities for industry transformation remain in unmanned aerial vehicles, aerospace and other high-value-added sectors. If companies can leverage this crisis to drive upgrades, there remains room for future breakthroughs.
The "tariff tsunami" is approaching with tremendous force, as the machine tool industry confronts the triple pressures of frozen exports, expanding foreign exchange losses and capacity adjustments. Takisawa's four-day work week may be just the beginning, with other manufacturers successively falling victim. Industry associations, including trade organizations, are rapidly rallying, demanding government intervention in negotiations, exchange rate management and financial policies.
In this moment of intensifying global supply chain competition, this tariff war not only affects corporate profitability but tests whether the industry can ride these winds of change to transform itself and discover new opportunities for growth. ◼
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This article is excerpted from the August issue of Global Views Monthly. Click here for the Chinese-language version of this story:
關稅海嘯第一排！瀧澤科宣布週休三日，只是產業寒冬的序幕？
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