Japanese Automakers in Mexico and Canada Face Tariff Threat from Trump
Japanese automakers and their suppliers with production bases in Mexico and Canada are facing the possibility of punitive tariffs after Donald Trump takes office in January. In a social media post on November 25, the U.S. president-elect vowed to raise tariffs on imports from the two countries to 25 percent.
This could have a significant impact on companies like Toyota, Honda, Nissan, and Mazda, all of which operate production plants in Mexico where labor costs are relatively low. These companies export a substantial percentage of their vehicles built in Mexico and Canada to the United States, taking advantage of the United States-Mexico-Canada Agreement (UMCA).
The UMCA, which took effect in 2020, exempts imports and exports among the three countries from tariffs under certain conditions. However, Trump's proposed tariffs could disrupt this arrangement and lead to higher costs for consumers.
Honda Executive Vice President Shinji Aoyama has expressed concern about the potential impact of the tariffs, stating that they could have a "huge" impact on imports from Mexico. He said the company will resort to lobbying and other efforts to address the situation.
Nissan, which recently announced plans to shed 9,000 workers worldwide and reduce global production capacity by 20 percent, could also be further impacted by high tariffs on imports from Mexico.
Mitsui Chemicals, which produces plastics for auto parts in the United States and Mexico, has also expressed concern about the potential impact of the tariffs. President and CEO Osamu Hashimoto said that if tariffs on trade with Mexico rise substantially, the company will be forced to review the allocation of work between the United States, Mexico, and elsewhere.
Major auto-parts maker Denso Corp., which supplies air-conditioners and other components produced at four factories in Mexico to automakers' plants in Mexico and the United States, is also closely monitoring the situation.
It remains to be seen what policies Trump will ultimately implement regarding trade with Mexico and Canada. However, the possibility of punitive tariffs is causing concern among Japanese automakers and their suppliers.