Trump announces possible 50% tariff on vehicles from Canada
US President Donald Trump announced a 50% tariff on Canadian-made cars, trucks and auto parts, which, he said, is set to take effect on January 1, 2027. Toyota and Honda could be affected the most by the possible restrictions: together, these companies produce more than three-quarters of all vehicles assembled in Canada, Motor1 reports.
At the same time, the tariff implementation plan remains politically and legally uncertain on both sides of the border.
Risks for automakers
According to the publication, Toyota and Honda together account for around 76% of vehicle production in Canada and employ more than 60% of workers in the Canadian auto assembly sector. In a corporate message to investors, Toyota described the tariff threat as a significant risk to its North American production.
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The companies have not publicly specified what share of the additional costs they are prepared to absorb through their own margins and what share they may pass on to buyers in the United States. Reuters noted that automakers may try to redirect Canadian-assembled models or alter production plans; the distribution of costs will depend on market conditions.
Supply chains
According to Motor1, US and Canadian negotiators had previously discussed an agreement that could reduce the current 25% rate to 15%. However, the talks collapsed, after which Trump stated his intention to apply a 50% rate to cars, parts and trucks from 2027.
Components for a single engine or transmission can cross the US-Canada border several times before final assembly, meaning tariff costs may accumulate at different stages of supply. Motor1 also notes that Toyota moved part of its production to the United States, including by increasing the share of US-made components in the Tacoma pickup truck. At the same time, relocating production capacity requires years and substantial investment. If the rate takes effect, prices for Canadian-assembled Honda CR-Vs, Toyota RAV4s and other models may rise, or manufacturers may reduce their own margins.
