Can lowering auto tariffs solve the trade imbalance between Taiwan and the United States? In-depth analysis of the imported car tax system and the current status of the industry

Recently, the United States announced a high tariff policy on the world, including Taiwan, which has brought a huge impact on domestic industries and trade structures. This article will use the automobile industry as an example to explore in depth whether Taiwan should lower automobile tariffs and whether such measures can solve the long-standing trade imbalance between Taiwan and the United States.

1. Causes and impacts of Taiwan-US trade surplus

Taiwan's exports to the United States each year far exceed its imports, resulting in a huge trade surplus. These surpluses converted into a large amount of capital flowing into Taiwan, but due to limited investment channels, they ultimately flowed into real estate, further pushing up housing prices. This also makes people question whether a trade surplus is entirely a "good thing"?

2. Analysis of tariff structure: How to calculate the tax burden of electric vehicles?

Take the American-made Tesla Model S as an example, its export cost is 2 million yuan:

1. Tariff (17.5%): Increased by RMB 350,000, bringing the cost to RMB 2.35 million.
2. Goods tax: Electric vehicles enjoy preferential treatment, with goods below 1.4 million being tax-free, and the excess of 950,000 being taxed at 15%, or 142,500 yuan.
3. Operations and Profits: Assume Tesla earns $300,000 and the price rises to $2.8 million.
4. Business tax (5%): plus approximately RMB 140,000.

➡️ The final selling price was approximately 2.94 million yuan.

This means that although electric vehicles enjoy excise tax benefits, tariffs and other indirect costs still keep the prices high.

3. The tax burden on traditional gasoline vehicles is even more alarming

If the imported product is not an electric car but a BMW X5 (cost 2 million yuan):

• The cost after tariffs is 2.35 million yuan;
• Add to that 30% goods tax, about 700,000 yuan;
• The accumulated tax burden has significantly pushed up selling prices.

This also explains why the prices of imported cars in Taiwan remain high.

4. Non-tariff trade barriers: Special case for “passenger and freight vehicle certification” for domestically produced vehicles

Currently, many domestically produced SUVs in Taiwan (such as Ford Kuga, Hyundai Tucson L, and Honda CR-V) use "van certification" and only need to pay 15% goods tax, which is much lower than the 25~30% for ordinary cars.

However, this certification cannot be applied to imported vehicles, which constitutes a non-tariff trade barrier and further limits the price competitiveness of imported vehicles.

5. Reducing tariffs = promoting US car sales? The fact may not be

Even if tariffs are eliminated, the overall price of imported cars will fall, but American cars will not particularly benefit. Here are the reasons:

• Taiwan’s current imports account for nearly 50% of its vehicles, but American cars only account for a small portion of that;
• According to the Ministry of Finance, the total amount of automobile imports from the United States in 2024 will only be about NT$30.3 billion, which is less than 10% of the overall imported car market (estimated to be about NT$300 billion);
• Most imported cars are still Japanese and German brands.

Therefore, simply lowering tariffs cannot effectively solve the Taiwan-US trade deficit problem.

6. Policy discussions should be based on a complete industry context

The issue of automobile import tariffs is not just a price issue, but a comprehensive discussion involving the overall tax system, industry protection and trade policy. Simply equating "high tariffs = protected industries = high prices" ignores the deeper institutional design and industrial realities.

If the government wants to adjust Taiwan-US trade relations in the future, it should return to the overall economic and trade strategy and balance industrial competitiveness and consumer rights to avoid the trade war from further expanding its impact on the domestic market.