Last week, US President Donald Trump said he is raising tariffs on all Canadian cars, trucks, auto parts, and steel to 50% starting in 2027. The United States and Canada have been engaged in a trade war, with both country’s threatening tariffs that would affect several companies and markets. Specifically, the automotive industry is being impacted due to manufacturing on both sides. Two companies that may experience significant hardships amid the tariffs, however, are Toyota (TM) and Honda (HMC).
Indeed, the Japanese automakers have as much to lose as any other car manufacturers that have operations in the US and Canada. That’s according to JPMorgan Securities’ head of global auto equity research Jose Asumendi, who wrote a note to clients this week about the impact the US-Canada tariffs will have on the automotive industry. Specifically, he said that Canadian-built vehicles accounted for nearly a quarter of Honda’s US sales last year, and 17% of Toyota’s.
General Motors (GM), Ford (F) and Stellantis will be heavily impacted by the tariffs as US automakers. However, Toyota and Honda produce more than three-quarters of all cars made in Canada, per research from Reuters. Additionally, new tariffs could force them to shut some of their Canadian assembly lines because production would be economically unfeasible. Furthermore, Toyota builds some RAV4 SUVs in Canada, and Honda does the same with some CR-V SUVs, all of which are shipped to US dealers. Thus, these developments will likely be affected by surging prices in materials and shipping costs.
In response to the tariff threat, Ontario Premier Doug Ford threatens to cut off electricity and critical minerals to the US if the trade war with Canada worsens. Trump has long accused Canada of taking advantage of the US, including its defence protections, and recently called Canadian negotiators “nasty”. From 2024 to now, Trump has implemented sweeping tariffs on Canada and Mexico, accusing both of allowing fentanyl and illegal immigration to flow across the borders, which many in Canada felt was unjustified.
Both Honda (HMC) and Toyota (TM) stocks are up north of 5% in the past month and a further 1% up on Tuesday. However, the recent growth could be stalled as the US-Canada tariff threats continue.