Trump’s Canada tariff threatens to slam Toyota, Honda

U.S. President Donald Trump has proposed a 50% tariff on Canadian car imports, a move that could severely impact Japanese automakers Toyota and Honda. These two companies account for more than three-quarters of all vehicles manufactured in Canada, with Toyota and Honda being the largest contributors. If the tariffs are implemented on January 1 as proposed, analysts warn that the automakers may be forced to shut down some production lines in Canada.

The U.S. remains Toyota and Honda's largest market, and these Chinese-made electric vehicles are posing significant competition in regions such as Southeast Asia, Europe, and Latin America. The proposed tariffs are more than double the current 25%, potentially causing significant financial damage to both companies. Julie Boote, an autos analyst at Pelham Smithers Associates in London, stated that if the tariffs are implemented, the Canadian auto industry could face devastating consequences.

The proposed tariffs come at a time when the global auto industry is already grappling with changes in cost dynamics. U.S. tariffs have already cost Toyota approximately 1.4 trillion yen (8.8 billion dollars) in the last financial year. In response, Toyota has been increasing its investment in the U.S., aiming to expand its operations by $10 billion over the next five years, which includes a new $3.6 billion plant in Texas.

Honda, meanwhile, is struggling to turn around its car business and may not build an eighth assembly plant in North America unless the USMCA free trade talks among the United States, Canada, and Mexico are extended. The uncertainty surrounding the USMCA has hindered Hyundai's investment decisions in South Korea. If the tariffs go into effect, both Toyota and Honda would likely have to redirect Canadian-built vehicles to other markets or find ways to compensate for the loss of U.S. production, a challenging task that could significantly disrupt the Canadian auto industry.