Toyota, Honda Face Major Risk From Trump’s Proposed Canada Tariffs

Japanese automakers Toyota and Honda could face significant financial and operational challenges if U.S. President Donald Trump proceeds with a proposed 50% tariff on vehicles imported from Canada.

The two companies account for more than three-quarters of all vehicles produced in Canada, making them particularly vulnerable to the proposed tariffs, which are scheduled to take effect on January 1 if implemented.

Analysts said the tariffs could force Toyota and Honda to shut down some assembly lines in Canada, potentially disrupting production and increasing costs.

Canadian-built vehicles represented nearly a quarter of Honda’s U.S. sales and about 17% of Toyota’s U.S. sales last year, according to Barclays analysts. The figures give both automakers a major exposure to any new tariffs on Canadian vehicle imports.

Canada’s automotive industry produces around 1.2 million vehicles annually and supports approximately 427,000 jobs indirectly. Toyota exports vehicles such as the RAV4 from Canada to the United States, while Honda exports the CR-V, both of which are among the best-selling SUVs in the American market.

The proposed tariffs come at a difficult time for Japanese automakers, which are already facing growing competition from lower-cost Chinese electric vehicle manufacturers in markets across Southeast Asia, Europe and Latin America.

Toyota has been increasing its investment in U.S. manufacturing as it seeks to reduce its exposure to trade disruptions. The company has announced plans to invest up to $10 billion over five years to expand its U.S. operations, including a new $3.6 billion plant in Texas.

Honda, meanwhile, is under pressure to revive its loss-making automobile business. A senior Honda executive recently indicated that the company could reconsider plans for an eighth North American assembly plant if uncertainty surrounding the United States-Mexico-Canada Agreement continues.

If the tariffs take effect, Toyota and Honda could attempt to redirect Canadian production to other international markets while finding alternative ways to supply the U.S. market. However, analysts said such a strategy would be difficult because vehicles built for the U.S. market are designed around specific consumer requirements and regulations, while other factories may already be operating close to full capacity.

The proposed tariffs therefore represent a potentially major shift in North American automotive production, which has relied for decades on integrated supply chains linking the United States, Canada and Mexico.

Both Toyota and Honda declined to comment on the potential impact of the proposed tariffs.