This article discusses the impact of the U.S. increasing tariffs on Taiwanese machine tools, raising the rate from the original 4.4% to 20%. This sharp hike has significantly weakened Taiwan’s competitiveness in the U.S. market, with small and medium-sized enterprises (SMEs) being particularly hard-hit. In response, the industry has called for relaxed subsidy requirements and efforts to expand into new markets. Meanwhile, the government has introduced relief programs to help businesses reduce their dependence on the U.S. Despite the challenges, industrial transformation and close cooperation with the government remain key to moving forward.
Why Are Taiwanese Machine Tools “More Expensive Starting Today”? The Truth Behind U.S. Tariff Hikes and Procurement Risks
Starting in April 2025, a U.S. executive order triggered a policy known as “Tariff Reinstatement Day,” which caused import duties on Taiwanese products—such as machine tools—to surge from around 4.4% to as high as 32%. Even though the rate will later be adjusted down to 20%, it still remains significantly higher than the 15–25% tariffs imposed on similar imports from Japan, South Korea, and the EU.
This sudden shift has forced potential buyers and distributors to immediately recalculate their costs and procurement strategies.
— If you're considering importing CNC machines from Taiwan, this article will help you understand the background of the policy and what it means for your purchasing decisions.
The Terror of "Liberation Day"
In April 2025, the U.S. President signed Executive Order No. 14257, implementing a “Reciprocal Tariff” policy aimed at addressing long-standing trade deficits. The order declared that the United States was in a state of national emergency due to trade imbalances and imposed a 10% ad valorem tariff on imports from all trade partners, with even higher rates applied to certain countries. The policy seeks to rebalance global trade flows and, citing national security, emphasizes the importance of fair and reciprocal trade.
Subsequently, on August 1, 2025, the U.S. government released an updated tariff schedule detailing the applicable reciprocal tariff rates for each country. Taiwan's tariff rate was set at 20%, higher than Japan and South Korea’s 15%. Both the U.S. and Taiwan have stated that this 20% rate is a “temporary tariff,” which may be subject to adjustment depending on the outcome of future negotiations.
This policy has triggered a new wave of tariff adjustments across many countries, with Taiwan’s machine tool industry being one of the hardest hit.
How Tariffs Are Pressuring Taiwan’s Machine Tool Industry
Taiwan’s machine tool industry is highly export-oriented, with the United States serving as its second-largest export market, generating an average of approximately USD 400 million in annual exports. Key products include machining centers, lathes, forging and stamping machinery—renowned in the U.S. for their high cost-performance ratio and flexible delivery times, making them highly competitive and widely favored.
Since the majority of these machines are exported and the domestic market remains relatively small, shipments to the U.S. account for a significant portion of overall sales. However, the newly imposed 20% tariff has sharply increased export costs, almost instantly eroding Taiwan’s price advantage in the market.
Industry experts note that the tariff’s impact is particularly severe for mid-range models. While larger manufacturers and high-end products may be slightly more resilient, small and medium-sized machine tool makers are facing much greater challenges. Furthermore, with global demand for machine tools already in a slump, rising trade barriers could further intensify the deterioration of market competitiveness.
Tariff Impact and the Competitive Struggles of Taiwan’s Machine Tool Industry
The industry widely agrees that this wave of tariff pressure presents an unprecedented challenge for Taiwan’s export-oriented machine tool sector. Mr. Chuang Ta-li, Chairman of the Taiwan Machinery Association, candidly stated that the U.S. is the largest buyer of Taiwanese machinery equipment. While the industry had hoped that Taiwan’s tariff rate would at least match those applied to Japan and South Korea, the final rate announced was 5 percentage points higher than expected. This has severely undermined Taiwan’s competitiveness in the U.S. market, and the industry can only watch helplessly as market share slips away. The pressure is especially acute for small and medium-sized enterprises (SMEs).
The Taiwan Machine Builders’ Association (TMBA) pointed out that companies cannot qualify for government subsidies unless their revenue declines by at least 15%, which is a significant hurdle for SMEs that already operate with limited order volumes.
The new tariff order has clearly eroded the price advantage of Taiwanese machine tools, leading to the risk of orders shifting to suppliers in Japan, South Korea, or elsewhere. Compounding this issue is the recent strengthening of the New Taiwan Dollar, which further raises export costs and limits the competitiveness of Taiwanese manufacturers. Coupled with high uncertainty on the demand side, many companies have begun to hesitate on new orders and delay shipments.
For example, in the Taichung region, precision machinery firms have accelerated shipping schedules. According to labor bureau statistics, 33 companies have implemented unpaid leave or adopted a “three days off, four days on” work schedule, reflecting the rapid market response to the impact.
Overall, the additional 20% tariff poses a dual threat to Taiwan’s machine tool industry: market loss and the “sliding order effect,” directly endangering the industry’s profit margins and competitive position.
Diverse Strategies of Taiwan’s Machine Tool Industry to Cope with Tariff Impacts
Facing unprecedented pressure, the industry has actively submitted proposals to the government and sought ways to help themselves. The Taiwan Machine Tool & Accessory Builders’ Association (TMBA) has put forward five key recommendations: easing subsidy thresholds while considering the varying capabilities of small and medium-sized enterprises (SMEs); maintaining cash flow by continuing to promote investment subsidies and loan programs; expanding domestic demand through public infrastructure projects and smart upgrades to release local machinery needs; assisting logistics to tackle challenges by setting up dedicated service windows for customs clearance and transshipment consultation; and promoting workforce transformation by strengthening training related to green manufacturing and digital applications.
On the government side, relief measures have also been introduced. The Ministry of Economic Affairs (MOEA) launched a manufacturing revitalization budget totaling approximately NT$88 billion, covering items such as subsidies for equipment replacement and financing loans. However, current application requirements have been criticized by the industry as overly strict. Additionally, the MOEA has initiated a special NT$10 billion program to subsidize machine tool manufacturers in establishing overseas sales offices or warehousing systems (with a maximum subsidy of NT$5 million per individual company and up to NT$20 million for joint exhibition centers like Taiwan pavilions), aimed at helping businesses actively explore diversified markets.
Against this backdrop, manufacturers are also working to reduce dependence on the U.S. market by accelerating participation in overseas exhibitions—such as the Beijing Machine Tool Exhibition in China—and expanding into promising markets like India, ASEAN countries, and Europe to shift customers and diversify risks. Some industry players have pointed out that if the Russia-Ukraine conflict ends, they hope export bans on Russia will be relaxed to seize local reconstruction opportunities.
Overall, Taiwan’s machine tool industry is striving to help itself through digitalization, energy-saving upgrades, and market diversification strategies, while hoping the government will assist in stabilizing exchange rates and easing the cost pressures brought on by inflation during negotiations for more favorable trade terms.
Moving Forward Amid Change: Responses and Hopes of Taiwan’s Machine Tool Industry
Although the final details remain uncertain and subject to change, the latest U.S. reciprocal tariff policy has undoubtedly delivered a shock to Taiwan’s machine tool industry, causing significant short-term export disruptions and market uncertainty. However, within this adversity lies an opportunity for transformation.
Industry associations emphasize that Taiwan’s machine tool sector has repeatedly faced international economic cycles and various challenges, yet has consistently emerged stronger through transformation and upgrading. Moving forward, the key will be whether the government and industry can work collaboratively and respond with agility. On one hand, accelerating industrial transformation and supply chain upgrades to build a more resilient industrial structure; on the other, actively striving for more favorable treatment on the international stage.
Ultimately, the new U.S. tariff policy on Taiwan has drawn global attention. The effectiveness of Taiwan’s machinery industry in responding will impact not only exports and employment but also the long-term competitiveness of the nation’s industrial base. The hope is to quickly turn this crisis into an opportunity, allowing Taiwan’s machine tool industry to continue demonstrating its resilience and strength amid an ever-changing trade landscape.
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