According to Reuters report on August 31, U.S. President Donald Trump is targeting Ottawa, planning to impose a 50% tariff on cars imported from Canada. However, it is likely that Toyota and Honda from Japan will bear the consequences of this decision.
These two Japanese automobile manufacturers account for more than three-quarters of Canada's total automobile production. Analysts say that if the tariffs take effect on January 1st next year as planned, both companies may be forced to shut down some of their production lines.
The report indicates that if the United States imposes additional tariffs at this time, it would be extremely bad for Japanese automobile manufacturers, as they are already facing competition from Chinese low-cost electric vehicles in markets such as Southeast Asia, Europe, and Latin America.
The United States remains Toyota and Honda’s largest overseas market. More importantly, Chinese competitors like BYD are currently unable to enter the US market.
Barclays analysts say that by 2025, cars produced in Canada will account for nearly a quarter of Honda's sales in the US market, and 17% of Toyota's sales in the US market. This proportion is the highest among major automakers. Therefore, if Trump doubles the current 25% tariffs as planned, the potential impact on these two companies will be significant.
The Canadian automotive industry produces approximately 1.2 million cars each year, indirectly supporting around 427,000 jobs. Toyota exports vehicles to the United States, including the RAV4, while Honda exports the CR-V. Both of these cars are among the best-selling SUVs in the American market.
British market research firm Pelham Smithers Associates' automotive industry analyst Julie Butt said, "If you really want to destroy the Canadian automobile industry, these tariffs are enough to do it."
She said that Toyota and Honda may have to shut down some of their assembly lines located in Canada.
Both Japanese car manufacturers refused comment.
The proposed tariffs are yet another example of how Trump's trade policies force the global automotive industry to adapt.
Over the years, car companies and their suppliers from the United States, Europe, Japan, and South Korea have utilized cross-border trade agreements, along with lower labor costs in places like Mexico, to establish production chains across North America. But now, things have changed dramatically. In the last fiscal year, U.S. tariffs cost Toyota approximately 1.4 trillion yen (8.8 billion US dollars).
Toyota is currently increasing its investment in domestic production in the United States. The world's largest automobile manufacturer announced last year that it plans to invest up to $10 billion over five years to expand its operations in the U.S. This includes the construction of a new automobile factory in Texas, which will cost $3.6 billion. Toyota intends to move the production of Tacoma pickups from its factory in Baja California, Mexico, to this new facility.
A senior Honda executive recently told reporters that the company may not build its eighth vehicle assembly plant in North America unless the United States, Canada, and Mexico extend the Free Trade Agreement of USMCA.
