Toyota, Honda dodge bullet under Canada, U.S. trade pact

The CR-V inspection line at Honda's assembly plant in Alliston, Ontario, in March 2015. Honda imports about a third of the light vehicles it sells in the U.S. The company exported 320,000 units from Canada in 2017 and 130,000 units from Mexico. Photo credit: REUTERS

The U.S. and Canada's trade deal could spell relief for car manufacturers thousands of miles across the ocean.

Toyota Motor Corp. and Honda Motor Co. are among the automakers that would have the most to lose by any additional tariffs, as the Japanese giants build vehicles in Canada for the U.S. market. Those include the RAV4, Toyota's best-selling crossover, which are all shipped to the U.S. from Canada or Japan.

Canadian auto exports up to a certain threshold won't be impacted by any U.S. tariffs on automobiles, a key reprieve for Canada as part of the agreement to replace the 24-year-old North American Free Trade Agreement, people familiar with the matter said. Still, the accord involves tighter rules of origin for auto production, according to two senior Trump administration officials who spoke to reporters on condition of anonymity.

"Investors are still very cautious," said Seiji Sugiura, an analyst at Tokai Tokyo Research Center. "The business environment under President Trump is tougher for Japanese automakers" and "they will still need to adjust production within the NAFTA region to meet local content requirement."

Toyota imported more than half of the 2.4 million vehicles it sold in the U.S. last year, including several of its top-selling and highest-profit vehicles. The RAV4 crossover took over as Toyota's leading model in the U.S. last year, with sales rising 16 percent to about 408,000.

In May, Toyota said it is investing more than $1 billion in its Canadian operations to boost RAV4 production. Canada also supplied 95 percent of the roughly 108,000 Lexus RX crossovers sold in the U.S. last year.

Honda, meanwhile, imports about a third of the cars it sells in the U.S. The company exported 320,000 units from Canada in 2017 and 130,000 units from Mexico.

A Honda representative declined to comment until a trade agreement has been finalized. Toyota didn't have an immediate comment.

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