TAIPEI (Taiwan News) — As Taiwan and the US engage in tariff negotiations, major changes may affect the domestic auto industry, potentially leading one or two companies to stop operations.
A Ministry of Economic Affairs tax assessment report showed that lowering the current 17.5% import tariff will impact 82,600 jobs and lead to an estimated net tax loss as high as NT$60 billion (US$1.99 billion), per UDN.
According to an industry insider familiar with Taiwan-US tariff negotiations, the MOEA is currently discussing several options for lowering import tariffs on foreign vehicles.
Imported autos in Taiwan face many taxes, including an import tariff of 17.5 %, a commodity tax of 25-30%, and a business tax of 5%. One MOEA proposal is abolishing the commodity tax, which will benefit both imported and domestically produced cars. Another option is lowering import tariffs on auto parts, which helps foreign automakers and could reduce the cost of domestically produced cars.
The MOEA said that if Taiwan eliminates import tariffs, consumers may not necessarily benefit. For example, it said that since the end of 2020, the Japanese yen has depreciated, leaving room for price reduction based on exchange rate fluctuation, but in fact, there have never been any price cuts for imported Japanese cars.
President Lai Ching-te (賴清德) has said tariff negotiations with the US can start with a goal of zero tariffs. Economics Minister Kuo Jyh-huei (郭智輝) has also addressed the issue, as he said import tariffs on passenger cars could be reduced annually or in stages.
According to the MOEA, Taiwan's passenger vehicle industry is currently at a critical juncture in moving toward electric vehicles. Should tariffs be reduced or canceled, domestic automakers and parts manufacturers may simply stop operations rather than transition to new technology as profit concerns loom.
Factory closures will affect automobile output value and the livelihoods of related employees. It could also lead to a decline in competitiveness and R&D capabilities, potentially impacting Taiwan’s involvement in the next generation of passenger vehicles.
