Toyota, Honda shares rally on U.S.-Canada auto tariff deal reports

Shares of Toyota Motor and Honda Motor ↗ 2.16% rose in Tokyo trading on Thursday after reports that the Trump administration is moving to cut tariffs on vehicles imported from Canada to 15% from the current 25%, easing pressure on automakers with production facilities north of the border.

The Deal Taking Shape

The stock gains followed a late Tuesday announcement by President Donald Trump on Truth Social that he would pause planned 50% tariffs on a range of Canadian goods for three days, citing a tentative deal between Washington and Ottawa. Bloomberg reported Wednesday that the administration is poised to reduce auto tariffs to 15% as part of a broader agreement that would also see Canada drop retaliatory trade measures.bloomberg+1

Reuters reported that the proposed deal would cut top-line tariff rates on Canadian-built cars and trucks to 15% from the existing 25% "Section 232" national security tariff. The agreement could also lower tariffs on Canadian steel and aluminum.investing+1

Tokyo-listed Toyota shares climbed 3.7% while Honda surged nearly 5%, helping underpin a 0.8% gain in the Nikkei 225 index. Both companies operate major manufacturing plants in Ontario and ship vehicles from Canada to the United States.investing

Sticking Points Remain

Negotiations have centered on which content qualifies for tariff deductions. The U.S. has insisted that only U.S.-specific content be exempt, while Canada has pushed for all North American content — including Canadian and Mexican parts — to be deducted. Greig Mordue, an associate professor at McMaster University and former Toyota Canada general manager, told the Globe and Mail that a 15% tariff on non-U.S. content translates to an effective rate of roughly 7% to 8%.wmbdradio+1

Broader Trade Context

The tariff talks unfolded against the backdrop of escalating trade tensions. The White House in July imposed additional 50% tariffs on certain Canadian goods, and a new round covering dairy, alcohol, and other products had been set to take effect on August 19 before Trump's pause. CNBC reported that the tentative deal also involves the Keystone XL pipeline and other energy-related provisions. Negotiators now face a Saturday deadline to finalize documents before the paused tariffs resume.cnbc+2