Taiwan grapples with rising unpaid leave as Trump’s tariffs bite

US tariffs trigger a sharp rise in unpaid leave across Taiwan.

Taiwan is facing a fresh economic hit as nearly 4,900 workers across 245 companies are now on unpaid leave, the highest number this year, according to the the country's Ministry of Labor. The sharp rise is largely due to steep new US tariffs imposed by President Trump, hitting machinery and tools manufacturers the hardest.

The number of furloughed workers has jumped by over 1,000 since late August, reversing earlier trends when figures stayed below 2,000. About 92% of those affected—roughly 4,480 people—are in manufacturing, highlighting the impact on Taiwan’s key industrial sectors.

The Tariff Shock

Taiwan’s current troubles began in April when President Trump imposed 32% tariffs on Taiwanese exports, later reduced to 20% in August after tense talks. While semiconductors were spared, industries like machinery, petrochemicals, and textiles were hit hard—especially the machinery and tools sector.

This sector is particularly vulnerable due to its heavy dependence on the US. market and its deep ties to global supply chains. As tariffs undercut competitiveness, orders have dropped not just from American buyers but also from partners in allied countries. Rising pressure from competitors in South Korea, Germany, and Japan—helped by more favorable exchange rates—has further worsened the situation. At least 3,000 workers have been directly affected by the tariffs, according to Taiwan’s Ministry of Labor.


A Contentious Safety Valve

Unpaid leave in Taiwan is designed to help firms cut costs without laying off workers, allowing businesses to recover faster when conditions improve. Employees on furlough are entitled to a monthly stipend of NT$28,590 (US$940), with government subsidies, but many don’t realize they still have income rights—an issue highlighted by Labor Minister Hung Sun-han.

The policy remains politically sensitive. A 2010 comment by then-Premier Wu Den-yih, calling the inventor of unpaid leave worthy of a Nobel Prize, drew backlash during a time when 240,000 workers were furloughed. That remark turned unpaid leave into a symbol of political disconnect and social inequality.

Today, doubts persist about the accuracy of official data, with some companies accused of disguising furloughs as “special rest days” or forced leave. NGOs and labor unions are pushing for stronger protections, including clearer regulations, better worker education, and expanded subsidies and retraining programs. For many families, even short-term income loss is a major blow amid high living costs and flat wages.

Searching for Remedies

When Trump’s tariffs first hit in April, Taiwan responded with a NT$93 billion relief package, later adding another NT$20 billion in August. The support includes subsidies, tax breaks, and low-interest loans across nine key sectors, but Taiwan’s heavy export dependence—nearly 70% of GDP—and limited leverage with the US. have kept its options constrained.

At a September meeting, Vice Minister of Economic Affairs Lai Chien-hsin outlined four key support programs: export loans, SME financing, tech upgrades, and market diversification. Over 700 applications—mostly from machinery firms—have already been approved, and Lai pledged continued support.

The government is also pushing global outreach through "Taiwan Select" promotions and has partnered with banks to offer currency hedging tools as the New Taiwan dollar strengthens. On the labor side, the "Recharge Program for Workers" offers paid skills training during furlough periods. Numerous high-ranking Taiwanese officials stated, "We will not take umbrellas away on rainy days, and will even actively offer them to those in need."


A Test of Resilience

Taiwan has weathered past crises—from the Asian Financial Crisis to COVID-19—thanks to its manufacturers' adaptability. But the current wave of unpaid leave highlights a deeper vulnerability: while Taiwan leads in semiconductors, its traditional industries remain exposed to global shocks.

Unpaid leave is more than just a cost-cutting tool; it's a warning sign. It reveals the risks of Taiwan’s export-heavy model and the real-world impact of geopolitical tensions on ordinary workers. Policymakers must look beyond GDP and tech exports to address the everyday struggles families face.

For global observers, Taiwan's situation is part of a larger pattern—the splintering of globalization into trade blocs shaped by tariffs and politics. What’s happening in Taiwan now could soon confront other export-driven economies facing similar global shifts.