In response to rising trade tensions and tariff changes, Subaru has decided to make significant shifts to its supply chain, affecting its business in Canada.
The Japanese automaker, which sold over 68,000 vehicles in Canada in 2024, is now looking to minimize the impact of the escalating trade scuffles that started with former President Donald Trump’s tariffs.
Impact on US-Built Cars
A large portion of Subaru’s sales in Canada last year, about 17,700 cars, came from US-built vehicles, accounting for nearly a quarter of its total sales.
However, Subaru Canada will drastically reduce its imports of American-made cars to just 10 percent by the 2026 model year.
This shift represents a notable loss, both in the number of cars sold and in revenue.
The most significant change will be to the popular Outback, which is currently built in the US but will no longer be available in Canada after 2026.
Instead, Subaru will switch to importing the Outback from Japan.
Strategy Behind the Move
Tomohiro Kubota, Subaru Canada’s CEO, explained that the company’s move is a strategic response to the counter surtax that was triggered by the US tariffs.
It’s simply cheaper for Subaru to produce and ship cars directly from Japan rather than dealing with the complications created by US trade policies.
Subaru already has production facilities in Japan that supply vehicles like the Crosstrek and Forester to Canadian dealerships, so this shift won’t come as a complete surprise to the Canadian market.
While Subaru did not directly address whether this move will affect jobs or production at its plant in Indiana, the decision does raise questions about the future of American manufacturing for Subaru.
Although Subaru had previously announced that its Indiana plant would start producing the Forester later this year, it remains uncertain whether any of those units will be shipped to Canada.
The Bigger Picture of Trade Tariffs
The heart of Subaru’s decision lies in the 25 percent import tax that was imposed earlier this year on vehicles from many countries, including Canada.
This tax was part of Trump’s broader trade policies, which led to retaliatory tariffs from Canada, imposing similar duties on US-built cars.
This situation has left many automakers caught in the middle, especially given the longstanding free trade agreements between the US and Canada that allowed goods to move freely across the border.
For decades, American car manufacturers like Ford and Stellantis built large factories in Canada, while foreign automakers set up production in the US and exported to Canada.
Trump’s tariffs have disrupted this flow, undermining the trade agreements, including the USMCA, which Trump renegotiated during his presidency.
Reactions from the Industry
Trump’s trade policies have had a mixed impact on the automotive industry.
While the goal was to encourage companies to build more vehicles in the US, the reality has been far from straightforward.
For example, Stellantis had to lay off 900 workers due to the tariffs, Honda decided to move its Civic Hybrid production to the US, and GM has ramped up production of American-made pickups. Volvo also pulled the S90 sedan from the US market entirely.
Automaker executives have expressed confusion over how to price their products in light of the shifting tariffs and trade policies.
The unpredictable nature of the tariffs, combined with ongoing trade wars, has created uncertainty across the industry, with manufacturers unsure about the future direction of trade and production.
What’s Next?
As the global trade landscape continues to evolve, Subaru and other automakers will need to navigate the complexities of trade tariffs, shifting supply chains, and the broader economic implications.
With political pressures and unpredictable tariffs, companies will have to rethink their strategies to stay competitive in the ever-changing automotive market.
The future remains uncertain, but one thing is clear: the impact of these trade wars will continue to ripple across the industry.