Japan Automakers Seen Facing Blow from Trump’s Canada Tariff Hike

Tokyo, Aug. 26 (Jiji Press)–U.S. President Donald Trump’s planned 50 pct tariff on Canadian automobiles and auto parts is poised to hit Japanese automakers, which have built production and supply chains spanning the United States, Canada and Mexico. On Monday, Trump said that the United States will double the tariff rate to 50 pct on Jan. 1, 2027. Japanese makers established North American production networks based on the USMCA, a free trade pact among the United States, Canada and Mexico, which exempts qualifying goods from tariffs. But a review of the agreement, which took effect in July 2020, has dragged on, while worsening U.S.-Canada relations are another complication. The USMCA was negotiated during Trump’s first administration. Automakers, including U.S. companies, have established vehicle plants in not only the United States but also Canada and Mexico for supply to the U.S. market. The controversial 50 pct tariff is expected to apply even to vehicles and parts that meet USMCA requirements. Toyota Motor Corp. produces vehicles including some Lexus luxury brand models and the RAV4, an SUV, at its Canadian plant for export to the United States. Toyota-affiliated parts makers Denso Corp. and Aisin Corp. also export air conditioner components, doorframes and other products from Canada. Honda Motor Co. exports popular models including the Civic to the United States. An official at its local unit says the volume is on the scale of 300,000 units a year. Japanese automakers are struggling even at the current U.S. tariff rate of 25 pct for vehicle imports from Canada. “We are in a difficult earnings environment,” an executive at one maker said. The planned hike to 50 pct “would make operations at Japanese companies with bases in Canada untenable,” the executive said. Viewing the high U.S. tariffs as more than a temporary measure, Japanese automakers plan to expand production in the United States. The deterioration in U.S.-Canada relations could also affect the ongoing USMCA review, making it harder for companies to revamp their supply chains. “It is clear that we need to overhaul our supply chains, but the conditions for doing this are not yet in place, leaving us little room to maneuver,” a senior official at a major automaker said. END [Copyright The Jiji Press, Ltd.]