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Trump’s Canada tariff might slam Toyota, Honda

By Sohail Khan 31 August 2026, 9:24 am

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Trump aims at Canada. Toyota and Honda could pay the bill
Synopsis

Proposed US tariffs could significantly impact Canadian auto production lines. Japanese automakers Toyota and Honda face potential production cuts due to these tariffs. These companies rely heavily on the United States as their largest market. The tariffs may force a major shift in global automotive supply chains. Automakers are now adapting to changing trade policies and competition.

Reuters

Proposed US tariffs could significantly impact Canadian auto production lines. Japanese automakers Toyota and Honda face potential production cuts due to these tariffs.

Tokyo: U.S. President Donald Trump is targeting Ottawa with a proposed 50% tariff on Canadian car imports – but Japan's Toyota and Honda may end up footing the bill.

The two Japanese automakers account for more than three-quarters of all cars made in Canada. They could be forced to shutter some production lines if the tariffs go into effect on January 1 as proposed, analysts said.

Also Read: Trump lashes out at Canada, urges firms to move to US to escape tariffs

While a ‌deal could still be ⁠reached, the ⁠timing of the U.S. tariffs couldn't be worse, as Japanese automakers are being stung by competition from low-cost Chinese EVs in markets such as Southeast Asia, Europe and Latin America.

The United States remains Toyota and Honda's biggest market and, crucially, one where Chinese rivals like BYD aren't allowed in.

Canadian-built cars accounted for almost a quarter of Honda's U.S. sales and 17% of Toyota's last year, the most among major automakers, according to Barclays analysts. As a result, the two face the biggest potential hit from Trump's plan to double the levies from the current 25%.

"If you really wanted to destroy the Canadian auto industry, you could with these tariffs," said Julie Boote, autos analyst at Pelham Smithers Associates in London.

Both companies would likely have to close some of their Canadian assembly lines, she said.

Toyota and ⁠Honda declined ‌to comment.

SCRAMBLING TO ADAPT

Canada's auto industry produces around 1.2 million cars a year and indirectly supports some 427,000 jobs. Toyota's exports from Canada to the United States include the RAV4, while Honda exports the CR-V. Both cars are among the best-selling SUVs in the United States.

Also Read: 'Time to teach Canada you can't do this anymore': Trump

The ⁠proposed tariffs are the latest example of Trump trade policies that have left the global auto industry scrambling to adapt. For years, U.S., European, Japanese and South Korean car companies and their suppliers built production chains across North America, taking advantage of cross-border trade deals and, especially in Mexico, lower labour costs.

But cost dynamics have now changed drastically. U.S. tariffs cost Toyota some 1.4 trillion yen ($8.8 billion) in the last financial year.

Toyota is now doubling down on U.S. production. The world's largest automaker last year said it aims to invest up to $10 billion over five years to expand its U.S. operations. That will include a new $3.6 billion auto plant in Texas, where it intends to move production of the Tacoma pick-up truck from its Baja California plant in Mexico.

For Honda, which is struggling to turn around its money-losing car business, tariffs have only ‌added to the strain.

A senior executive recently told reporters that it might not build an eighth assembly plant in North America unless USMCA free trade talks among the United States, Canada and Mexico are extended. USMCA is the revised version of the 1994 NAFTA trade pact and has been in place for six years. Trump ⁠opted on July 1 not to renew it, subjecting it to annual reviews, although talks have continued.

Last year, South Korea's Hyundai said uncertainty about USMCA was delaying its investment decisions.

'MAJOR SHIFT'

If the tariffs take effect, Toyota and Honda would likely try to redirect Canadian-built vehicles to other markets and then try to find ways to make up supply for the all-important U.S. market – hardly an easy task, analysts said. U.S.-bound vehicles are often tailored to the market's needs and regulations, while factories elsewhere may already be operating near capacity.

"It would represent a major shift from the past," said Seiji Sugiura, a senior analyst at Tokai Tokyo Intelligence Laboratory.

Two Japanese suppliers said they were unsure what would happen next and it remained, at least for now, impossible to plan given that it still remained uncertain whether the tariffs would go into effect.

"We're trying not to overreact," one of the supplier executives said.

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