Facing pressure from reciprocal tariffs announced by the U.S., Taiwan is preparing to engage in trade negotiations with Washington D.C.. This raises a crucial question: what changes would occur if Taiwan were to lower its car import tariffs?

The United States has adopted a policy of implementing equal retaliatory tariffs globally, and Taiwan was identified as having an effective tariff rate as high as 64%, leading to counter-tariffs amounting to 32%. This includes trade barriers and exchange-rate factors affecting pharmaceuticals, beef/pork imports from the U.S., and imported cars. It is widely anticipated that Taiwan may concede on car tariffs during upcoming negotiations; if this happens, what would be the consequences?

As many influencers and representatives have noted, a likely immediate effect of reduced tariffs would be lower import vehicle prices—a prospect welcomed by most consumers. Polls conducted by the New Power Party (時代力量) indicate that approximately 70% of citizens support reducing car tariffs.

Based on current data for car imports into Taiwan, Tesla Model 3 and Models S/X are among the top sellers, followed closely by BMW models such as X4, X5, X6, X7, and XM; Mercedes-Benz GLE series ranks third. The Toyota Sienna, Infinity QX60, and Ford Mustang also demonstrate significant demand.

Calculating the potential impact of tariff reductions: using tax calculation rules provided by a fiscal department for the Tesla Model 3 rear-wheel drive edition (with an approximate market price in Taiwan of NT$145 million), it is estimated that halving or eliminating tariffs could reduce its cost by between NT$1.2 and NT$2.5 million.

However, taxes and duties are cumulative; a tariff reduction would also influence subsequent goods tax and business tax calculations. Comparing this to the U.S.-based Model 3 price of $42,490 (approximately NT$1.4 million), the difference appears more manageable. Similarly, American-made Mercedes-Benzes and BMWs could become more competitively priced, potentially making imported cars a more attractive option for buyers.

However, car manufacturers are astute business strategists who have already factored tax rates into their pricing models. If consumers can afford NT$3 million for a vehicle, why would they purchase it at only NT$2.5 million? For luxury vehicles in particular, lower prices could diminish consumer interest; therefore, while there is room to reduce costs, this may not fully translate into final sale prices.

On the other hand, Toyota’s dominance of Taiwan's market—currently protected by tariffs—could be challenged if American imports benefit from reduced duties and Japan responds with similar demands. Domestic car manufacturers who have relied on assembly lines for Japanese brands might lose their incentive to produce locally and instead import more models directly from Japan.

Even now, imported cars account for 48% of the market; in terms of total sales volume (approximately 458 thousand units), Toyota alone accounts for roughly 12.5%. If tariffs were reduced or eliminated entirely, it's clear which manufacturers would be most affected. Considering a single model like the Toyota RAV4 without heavy taxes, domestic Corolla Cross models face increased pressure.

Returning to the initial question: Would consumers purchase cheaper cars with no import duties? For American imports, likely yes; but for overall average car prices, not necessarily. Again using Toyota as an example—if an imported RAV4 2.0 costs only NT$9 million and a domestic Corolla Cross is priced at around NT$85.9 million—the choice becomes clear.

Given Taiwan’s preference for imported cars, consumers might still opt to spend “a little more” on imports even if local models also lower their prices due to reduced tariffs. Beyond assembly quality or material differences, the simple availability of configurations not offered locally is a significant factor.