[Edaily Reporter SIN SOO-JUNG ] Analysis suggests that Japanese automakers Toyota and Honda could be hit hardest if U.S. President Donald Trump moves forward with plans to impose a 50% tariff on Canadian-made cars. Since the two companies account for more than three-quarters of Canada’s auto production, there is a possibility they may have to shut down some of their local production lines if the tariff is implemented as planned.

According to Reuters on the 31st, the U.S. is pushing to raise the tariff on Canadian-made cars—currently at 25%—to 50%, with the new rate set to take effect on January 1 of next year. There remains a possibility that the U.S. and Canada could reach an agreement before the measure takes effect.

The burden of the tariff hike is expected to fall heavily on Toyota and Honda, which operate large-scale production bases in Canada. These two Japanese automakers account for over 75% of Canada’s total automobile production.

The U.S. market also relies heavily on vehicles manufactured in Canada. According to a Barclays analysis, approximately 25% of the vehicles Honda sold in the U.S. last year were produced in Canada. Toyota accounted for 17%. This is the highest proportion among major global automakers.

If the Trump administration doubles the tariff from 25% to 50%, both companies’ price competitiveness and production strategies could come under pressure. Julie Boot, an automotive analyst at Pellem Smither Associates, stated, “If you really want to destroy the Canadian auto industry, you can do so with this tariff,” predicting that Toyota and Honda might have to shut down some of their Canadian assembly lines.

The Canadian auto industry produces approximately 1.2 million vehicles annually and supports about 427,000 jobs, both directly and indirectly. Toyota exports its RAV4 sport utility vehicle (SUV), produced in Canada, to the United States, while Honda supplies the CR-V. Both models are SUVs that sell well in the U.S.

If tariffs are implemented, both companies may consider redirecting vehicles produced in Canada to other markets and supplementing U.S. sales volumes from other plants. However, analysts pointed out that it would not be easy to implement this in the short term.

This is because vehicles exported to the U.S. are often produced to meet local regulations and consumer demand, and plants in other regions may already be operating near full capacity. Seiji Sugiura, a senior analyst at Tokai Tokyo Intelligence Laboratory, said that if the tariffs are actually implemented, “it will be a major change compared to the past.”

The Trump administration’s tariff policy is already increasing the cost burden on Japanese automakers. Toyota incurred costs of approximately 1.4 trillion yen due to U.S. tariffs in the last fiscal year.

Toyota is accelerating the expansion of its local production in the U.S. Last year, the company announced it would invest up to $10 billion in its U.S. operations over the next five years, including plans to build a new automobile plant in Texas at a cost of $3.6 billion. Production of the Tacoma pickup truck, currently manufactured at the Baja California plant in Mexico, is also scheduled to be moved to Texas.

Honda, which needs to reduce losses in its automotive business, is now facing the added burden of tariffs. A senior Honda executive recently stated that if the United States-Mexico-Canada Agreement (USMCA) free trade negotiations are not extended, the company may not build its eighth assembly plant in North America.

On July 1, President Trump opted not to renew the USMCA but to review it annually. However, negotiations among the three countries are ongoing. Hyundai Motor Company also stated last year that investment decisions were being delayed due to uncertainty surrounding the USMCA.

Japanese automakers also find it difficult to abandon the U.S. market. The U.S. is the largest market for Toyota and Honda, and it is a market that Chinese electric vehicle manufacturers, including BYD, have effectively been unable to enter. As competition from low-cost Chinese electric vehicles intensifies in Southeast Asia, Europe, and Latin America, the importance of their U.S. operations has grown even more.

Japanese auto parts manufacturers are also monitoring whether tariffs will be implemented. Two officials from Japanese parts companies interviewed by Reuters said it is difficult to formulate response plans because it remains uncertain whether the tariffs will actually take effect. An executive from one company said, “We are trying not to overreact.”