TAIPEI (TVBS News) — Taiwan's ongoing tariff negotiations with the United States have captured widespread attention across the island nation. However, the talks' progress remains unclear as experts begin analyzing potential impacts on various sectors. Dennis Weng (翁履中), associate professor at Texas State University, highlighted on June 14 the particular vulnerability of Taiwan's automotive parts industry amid these discussions.
Weng emphasized that while Taiwan's trade surplus primarily flows from its robust semiconductor sector, other industries — notably automotive components — face significant challenges under potential new trade arrangements.
The vehicle-related industry would encounter particular difficulties, Weng explained, including for components like tires, screws, and belts. Despite these concerns, the Taiwan Transportation Vehicles Manufacturers Association (TTVMA, 台灣區車輛工業同業公會) reported a 7.65% growth in auto parts exports for the first quarter of 2025, totaling NT$58.9 billion (approximately US$2 billion), underscoring the sector's economic importance.
TTVMA statistics further reveal that Taiwan's overall vehicle industry output reached NT$177.3 billion (US$6.02 billion) from January through March 2025. This represents about 3.62% of the nation's total manufacturing output, though it marks a 5.96% decline compared to the same period last year. The Industrial Technology Research Institute (ITRI, 工研院) has identified the United States as Taiwan's primary export destination for automotive parts. This relationship adds complexity to ongoing negotiations.
Many Taiwanese citizens hope to see car tariffs slashed from the current 17.5% to zero. However, the Ministry of Economic Affairs (MOEA, 經濟部) cautions that such a reduction could jeopardize NT$60 billion (US$2.04 billion) in tax revenue and approximately 80,000 jobs. Reduced tariffs might also discourage domestic production, given Taiwan's existing car tax structure. This includes a 25% to 30% commodity tax and a 5% business tax, with import car taxes reaching NT$540,000 (US$18,337) and domestic car tax burdens approaching 31%.
Electric vehicle expert Jeff noted that high labor costs could drive Taiwanese manufacturers to seek tariff exemptions. As Taiwan's legislature, the Legislative Yuan (立法院), resumes tax reform reviews this month, the automotive industry is pushing for quick resolutions. Auto website editor-in-chief Yang Hsin-ju (楊欣儒) stressed the urgency for clarity, citing a troubling 20% drop in sales compared to last year. While the MOEA supports reducing commodity taxes alongside tariffs, opinions within the automotive sector remain divided.
Yang referenced Australia's market as a cautionary example, suggesting tax reforms could trigger manufacturing migration and affect industry tax revenue. Complete tariff elimination appears unlikely, but any reduction will impact Taiwan's automotive supply chain, affecting both domestic and foreign manufacturers. As authorities navigate these complex negotiations, they must balance potential tariff reductions with tax system adjustments. The goal remains fostering industry upgrades while maintaining consumer loyalty to protect domestic manufacturing. Tax reform presents more complexity than the tariff negotiations themselves, with competitive pricing dynamics between electric and gasoline vehicles further complicating the landscape.
