U.S. President Donald Trump’s push for reciprocal tariffs, along with ongoing negotiations for a U.S.-Taiwan tariff agreement, has caused the domestic auto market to enter a period of uncertainty. The temporary postponement of the planned launch of the MG G50 PLUS SUV by China Motor Corporation is a microcosm of the market’s impact.
Chih-Yen Tai, an Associate Research Fellow at the International Economics (Second) Division of the Chung-Hua Institution for Economic Research (CIER), noted that the unsettled status of tariffs and commodity taxes has led to consumer concerns about “overpaying.” This has led to a freeze in buying activity, resulting in stagnation in new car sales. Used car dealers are also facing supply shortages and price pressures. If new car prices were to drop, the used car market would face a chain-reaction impact.
The government should expedite the finalization of commodity tax incentives, such as extending new car tax credits and trade-in subsidies, to reduce the wait-and-see attitude and stimulate demand. As for future tax cuts, the first wave of beneficiaries would likely be U.S.-imported vehicles, especially low-mileage used luxury cars.
Chih-Yen Tai predicts that auto industry businesses will continue to face inventory and profit pressures until the U.S.-Taiwan agreement is finalized. However, if the October negotiations yield results and are paired with policy subsidies, the long-suppressed market demand still has a chance to be released quickly.
Author: CIER Editorial Team
Date: August 27, 2025