Japan-based automakers manufacturing and selling vehicles in Canada are concerned punitive U.S. tariffs that might soon be added to Mexican-made automobiles will increase the cost of a small number of vehicles sold in Canada.
The Japan Automobile Manufacturers Association (JAMA) says about eight per cent of its members’ total annual sales are built in and imported from Mexico by way of U.S. railways, making them susceptible to the tariffs U.S. President Donald Trump has threatened to implement beginning June 10.
Trump said he would hit all goods coming from Mexico with a five-per-cent tariff, and would increase the duty each month until it reaches 25 per cent on Oct. 1, unless Mexico takes immediate action to help stem illegal immigration into the United States.
JAMA is a non-profit trade association representing subsidiaries of Japanese-brand automakers in Canada which manufacture, export, import, sell and service a wide range of vehicles in Canada. The association represents Toyota, Honda, Nissan, Mazda, Mitsubishi and Subaru as well as those automakers’ luxury brands.
JAMA spokesman David Worts says the vehicles that could be affected are the Honda Fit and HRV; the Mazda3; Toyota Yaris; and Nissan Note, Versa and Sentra. But, Worts said his association and its members are working on trying to avoid paying the tariffs, if they’re implemented and required on Canadian imports passing through the United States.
“If this U.S. tariff is applied on Mexican-built vehicles, the impact would likely vary depending on whether the vehicles are shipped to Japanese subsidiaries in the U.S. and then re-sold to Japanese automakers in Canada, or shipped through the U.S. into Canada directly,” Worts wrote in an email to Automotive News Canada. “In the first case, unless there was an applicable duty drawback in the U.S., the cost to our members in Canada would likely include the five-per-cent tariff. In that case, Canadian operations would take steps to minimize tariff impacts by importing in bond, if required.”
Businesses can post a bond to guarantee the affected import will be exported. The amount of the bond is usually double the estimated duties. Goods imported under a temporary import bond can remain in the United States without the payment of duty for up to a year.
The threatened duties could hit a number of global companies -— including American, Canadian, European and Asian manufacturers— with the auto industry looking particularly vulnerable. For years automakers have built vehicles in Mexico, taking advantage of its cheap labour, trade deals and proximity to the United States, the world's largest auto market after China.
Canada's largest auto supplier, Magna International, has 32 manufacturing and assembly plants in Mexico, where it employs 29,175 people — more than in either Canada or the United States.
"At this time it would be premature at this point for us to comment," Magna spokeswoman Tracy Fuerst said in an email to Automotive News Canada.
The Global Automakers of Canada, which represents 15-member companies based outside of Canada and the United States, didn’t immediately respond to a request for comment. The Canadian Vehicle Manufacturers’ Association, which represents the Detroit Three in Canada, also didn’t respond.
Reuters and Bloomberg contributed to this report.