TAIPEI (Taiwan News) — Taiwan’s manufacturing climate index rose in July, ending five months of decline as business confidence improved, Taiwan Institute of Economic Research reported Monday.

TIER said the index climbed to 86.80, up 1.17 points from June, per CNA. It attributed the rebound to easing tariff fears, stabilized exchange rates, and signs of relief from China’s industrial overcapacity, per UDN.

TIER Macroeconomic Forecasting Center Director Sun Ming-te (孫明德) said lingering concerns about US tariffs had weighed on sentiment earlier this year. However, with policies becoming clearer and currency fluctuations settling, he noted manufacturers are regaining confidence.

Attention has now shifted to the US Section 232 semiconductor tariff probe, launched after President Donald Trump floated tariffs of up to 300%. Sun said the risk to Taiwan is limited because Washington still relies heavily on Taiwanese chip capacity.

While giants like Google and Amazon might absorb the impact of higher tariffs, Sun warned smaller firms would be wiped out and the US’s AI infrastructure severely disrupted.

TIER President Chang Chien-yi (張建一) cautioned that the AI boom resembles past innovation cycles, which took decades to mature. Sun added that the sector remains in a costly, early investment stage, running “on willpower, not productivity,” and warned of a potential bubble.

Beyond manufacturing, the July services index slipped 0.33 points to 87.80, suggesting a neutral outlook. The construction index fell 0.96 points to 93.79, with TIER analysts citing housing curbs, tight credit, and weak buyer sentiment as key drags on the property market.