Trade Talks: Honda warns Canada tariff hike could devastate industry

Jennifer Thomas, senior vice president of corporate affairs at American Honda Motor Co., stated that the automotive industry faces a catastrophic scenario if the United States and Canada fail to finalize a new trade agreement by the end of the year.

President Donald Trump announced in August that he would double tariffs on Canadian vehicles and parts from 25% to 50% on January 1 if a deal is not reached. Thomas delivered her warning at a Reuters automotive conference in Detroit on Tuesday.

"That really would be catastrophic for the entire industry," Thomas said. She noted that trade associations representing Honda and other major industry players have advocated for a trilateral deal similar to the United States-Mexico-Canada Agreement, or USMCA, rather than a bilateral arrangement.

The USMCA took effect in 2020 after Trump negotiated it to replace the North American Free Trade Agreement. U.S. Trade Representative Jamieson Greer later announced that the U.S. would not automatically extend the pact, placing it into an annual review process instead of a 16-year trilateral extension.

Thomas described her outlook as cautiously optimistic, citing recent reports that the U.S. and Canada have reestablished trade talks. These discussions include easing levies on critical materials such as aluminum. "Our message has been clear: We need that trilateral agreement to stay in place in order for the U.S. industry to be competitive," she said.

Honda is the second-largest vehicle producer in Canada, trailing only Toyota Motor. While the company maintains large operations in Canada, it reports that more than 60% of the vehicles it sells in the United States are manufactured domestically across multiple U.S. assembly plants. Many automotive officials have expressed concern over the uncertainty caused by the volume of parts that cross borders for production.

Thomas stated that the North American region is now at a disadvantage compared to overseas countries with better tariff rates. The Trump administration has negotiated trade deals with major exporters like Japan and South Korea, which include 15% tariffs on vehicles.