Nafta deal could be relief for Canada exports of Toyota, Honda


TOKYO • The US 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 US market. Those include the RAV4, Toyota’s best-selling SUV, which are all shipped to the US from Canada or Japan.

Canadian auto exports up to a certain threshold won’t be impacted by any US tariffs on automobiles, a key reprieve for Canada as part of the agreement to replace the 24-yearold North American Free Trade Agreement (Nafta), 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 Centre. ”The business environment under US President Donald Trump is tougher for Japanese automakers” and “they will still need to adjust production within the Nafta region to meet local content requirement”. Shares of Toyota declined 0.5% yesterday in Tokyo, while Honda lost 0.1%.

Toyota imported more than half of the 2.4 million vehicles it sold in the US last year, including several of its top-selling and highest-profit vehicles.

The RAV4 crossover took over as Toyota’s leading model in the US last year, with sales rising 16% to about 408,000.

In May, Toyota said it is investing more than US$1 billion (RM4.14 billion) in its Canadian operations to boost RAV4 production. Canada also supplied 95% of the roughly 108,000 Lexus RX SUVs sold in the US last year. Honda, meanwhile, imports about a third of the cars it sells in the US.

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 finalised. Toyota didn’t have an immediate comment.