Honda has warned that 50% tariffs on Canadian vehicles and parts would be “catastrophic” for the North American car industry if the United States and Canada fail to reach a new trade agreement by the end of the year.
Donald Trump has threatened to increase the current 25% tariffs to 50% from January 1 if no deal is reached. Jennifer Thomas, senior vice-president of corporate affairs at American Honda Motor Co, said the proposed increase would have consequences across the sector.
“That really would be catastrophic for the entire industry,” Ms Thomas said during an automotive conference in Detroit.
She said the preferred outcome would be a trilateral agreement involving Mexico, similar to the United States-Mexico-Canada Agreement (USMCA). Trade associations representing Honda and other major US carmakers have been pressing for the existing three-country framework to remain in place, rather than separate bilateral arrangements.
“Our message has been clear: We need that trilateral agreement to stay in place in order for the US industry to be competitive,” Ms Thomas said. “It’s integral to our success.”
Her comments follow a decision by US Trade Representative Jamieson Greer to move the USMCA into an annual review process, rather than automatically extending the 16-year agreement.
The pact, negotiated by Mr Trump to replace the North American Free Trade Agreement during his first term, came into effect in 2020. He has since criticised the arrangement, accusing Canada of “ripping off the United States of America for years”.
Ms Thomas said she was “cautiously optimistic” that the threatened tariff increase could be avoided. She pointed to reports that Washington and Ottawa had resumed trade discussions, including talks on reducing levies on key materials such as aluminium.
Honda is the second-largest vehicle producer in Canada behind Toyota. The industry has raised concerns about continued uncertainty because components frequently cross North American borders during the manufacturing process.
Although Honda has significant operations in Canada, more than 60% of the vehicles it sells in the US are made at its assembly plants there. Ms Thomas said it was troubling to see North America placed at a disadvantage when some overseas countries now have more favourable tariff rates.
The Trump administration has reached trade agreements with countries including Japan and South Korea, both major vehicle exporters to the US, under which cars face tariffs of 15%.
