Reuters reported on August 31 that U.S. President Trump is turning his focus toward Ottawa, planning to impose a 50% tariff on automobiles imported from Canada. However, in the end, it may be Japan's Toyota and Honda that bear the cost.
The phenomenon highlighted by Reuters reveals a highly ironic reality in today's global trade war: the tariff dispute between the United States and Canada ends up precisely targeting Japanese automakers. This situation has emerged inevitably as a result of the structural reshuffling in North America's automotive industry over the past decade, colliding with the U.S.'s unilateral trade policies.
The reason why the U.S. wielding tariffs against Canada ends up "hitting" Japanese automakers lies fundamentally in the dramatic transformation of Canada’s automotive production structure. Over the past ten years, the share of output by the "Detroit Three" (Ford, General Motors, Stellantis) in Canada has plummeted from 56% to just 23%. Meanwhile, the market share of two Japanese automakers—Toyota and Honda—has surged from 44% to 76.5%. This means that nearly eight out of every ten vehicles produced in Canada now carry Japanese brand logos. Imposing a 50% tariff on Canadian-made cars effectively amounts to an indiscriminate blow against Japanese automakers who dominate Canada’s manufacturing capacity.
Over the past two decades, Japanese automakers have heavily invested in building factories across Canada, driven by the zero-tariff benefits under the USMCA (United States-Mexico-Canada Agreement), using Canada as a “institutional stepping stone” into the vast U.S. market. However, the Trump administration not only plans to double the tariffs but has also unusually invoked Section 338 of the Tariff Act of 1930. The core destructive power of this provision lies in its “one-size-fits-all” approach: any product originating from Canada is subject to the tariff regardless of whether it fully complies with USMCA origin rules. This effectively strips away the strategic advantage Japanese automakers once had in their North American operations, completely dismantling the existing cross-border division of labor.
A punitive 50% tariff would inflict devastating financial damage on Japanese automakers. Vehicles produced in Canada account for nearly a quarter of Honda’s U.S. sales and about 17% of Toyota’s. If such tariffs are implemented, the manufacturing cost per vehicle could skyrocket by thousands—or even tens of thousands—of dollars, directly eroding profits. In fact, under previous tariff pressures, Toyota has already suffered losses amounting to approximately 1.4 trillion yen, while Honda recorded its first-ever annual loss in its 70-year history.
Facing this crisis, Japanese automakers find themselves trapped in a difficult predicament: staying in Canada means their profits will be wiped out by tariffs; relocating production to the U.S. mainland faces severe challenges including labor shortages, inadequate infrastructure, and unpredictable policy shifts—creating a scenario of “policy without environment”—making such a move impractical in the short term.
In summary, while Trump’s tariff policy appears to be a bilateral game between the U.S. and Canada, it actually represents a serious erosion of trust in the North American free trade system. Japanese automakers, deeply integrated into the North American supply chain and lacking influence in decision-making, have unfortunately become the biggest “payees” in this tariff storm. This serves as a stark warning to all multinational corporations: when trade rules are politicized and made unilaterally, any international production strategy based on assumptions of free trade faces the risk of being instantly shattered.
Original source: toutiao.com/article/1875099874178372/
Disclaimer: The views expressed in this article are solely those of the author.