Subaru Adjusts Supply Chain and Moves Production to Japan as U.S. Tariffs Disrupt Canadian Auto Trade

Subaru’s recent decision to shift its supply chain strategy highlights the real consequences of trade wars and tariffs on international businesses.

Following U.S. President Donald Trump’s tariffs on imported vehicles, Subaru is cutting back its U.S. imports into Canada, leading to major changes in how cars are sourced and sold across North America.

Subaru Faces Fallout from U.S. Tariffs

In 2024, Subaru sold 68,043 cars in Canada, with more than 17,700 of those being vehicles built in the United States.

These American-built cars made up a significant portion of Subaru Canada’s sales, accounting for 26% of the total.

However, due to the trade tensions fueled by President Trump’s 25% import tax on foreign cars, Subaru’s Canadian division has been forced to rethink its strategy.

By the 2026 model year, Subaru plans to reduce U.S. imports to just 10% of its total sales in Canada.

Outback Production Moves to Japan

The most notable casualty of this decision will be the American-built Subaru Outback.

Once a staple of Subaru’s lineup in Canada, the Outback will no longer be imported from U.S. factories after 2026

. Instead, this popular model will come from Japan, sporting a “Made in Japan” label instead of the American-made tag that had been a part of its identity.

Why Subaru is Moving Production

Subaru’s decision is largely driven by economics. The company’s CEO in Canada, Tomohiro Kubota, explained that shifting production to Japan allows Subaru to avoid the impact of the counter surtax that came as a result of U.S. tariffs.

For Subaru, it’s simply cheaper to build and ship vehicles out of Japan rather than deal with the uncertainty and costs of dealing with U.S. trade policy.

Subaru already operates plants in Japan, where it manufactures popular models like the Crosstrek and Forester, which are sold widely in Canada.

This move aligns with the company’s existing infrastructure and helps it minimize losses caused by the trade spat.

Uncertainty for American Jobs

While Subaru’s shift to Japan will affect Canadian operations, it remains unclear how the changes will affect U.S. manufacturing jobs.

Subaru had previously announced plans to begin assembling the Forester at its Indiana plant later this year, but it’s uncertain if any of these units will end up crossing the border into Canada.

The company has not provided details on any potential production or job cuts in Indiana.

The Broader Impact of Trump’s Tariffs

The tariff war initiated by President Trump has disrupted decades of trade between the U.S. and Canada, where both countries once enjoyed mutually beneficial free trade agreements.

In retaliation to Trump’s 25% import tax on vehicles, Canadian lawmakers imposed their own duties on U.S.-built cars, making cross-border trade more costly and complicated.

For years, American companies such as Ford and Stellantis built massive factories in Canada, while international carmakers set up U.S. plants to ship vehicles to the Canadian market.

Trump’s tariffs, however, have disrupted these agreements, even going so far as to undo the U.S.-Mexico-Canada Agreement (USMCA) he negotiated during his first term.

Mixed Reactions from Automakers

Trump’s trade policies, which were intended to push automakers to manufacture more vehicles within the U.S., have resulted in mixed outcomes.

Some automakers, like Stellantis, have experienced significant job losses—900 layoffs attributed to the tariffs—while others, such as Honda, have shifted production of certain models like the Civic Hybrid to U.S. plants.

On the other hand, GM has ramped up production of its higher-priced, American-made pickup trucks, and Volvo has discontinued the S90 sedan in the U.S. market.

Many American automaker executives have expressed confusion over how to price their products due to the unpredictability of trade policy and tariffs, leaving companies in a precarious position as they try to navigate these turbulent economic waters.

Subaru’s Commitment to the U.S. Market

Despite these challenges, Subaru remains committed to the U.S. market. Atsushi Osaki, the company’s CEO, reassured attendees at the New York International Auto Show this year that Subaru is dedicated to offering a wide range of options for American customers.

However, the changing trade dynamics will likely continue to affect how Subaru and other automakers approach their production and pricing strategies in the coming years.