Honda Warns 50 Percent Canada Tariffs Could Devastate Auto Industry

Honda has warned that the North American automotive industry could face severe disruption if the United States raises tariffs on Canadian vehicles and parts to 50 percent on Jan. 1. Jennifer Thomas, senior vice president of corporate affairs at American Honda Motor Co., said Tuesday at a Reuters automotive conference in Detroit that the proposed increase would threaten the industry if Washington and Ottawa fail to reach a trade agreement by the end of 2026.

President Donald Trump has threatened to double the existing 25 percent tariffs if the two countries cannot reach a deal. Thomas urged the United States, Canada and Mexico to preserve a trilateral trade framework, arguing that cooperation across North America is essential to automotive competitiveness.

Thomas described the potential consequences of the tariff increase during the Detroit conference.

"That really would be catastrophic for the entire industry," said Jennifer Thomas, senior vice president of corporate affairs at American Honda Motor Co.

She said a broader agreement involving Mexico would offer a preferred alternative to separate bilateral arrangements. Automotive trade associations representing Honda and other major U.S. industry participants have advocated maintaining a comprehensive North American agreement.

Thomas emphasized the importance of preserving the existing regional framework.

"Our message has been clear: We need that trilateral agreement to stay in place in order for the U.S. industry to be competitive," Thomas said. "It's integral to our success."

The dispute comes as the future of the United States-Mexico-Canada Agreement, or USMCA, faces renewed uncertainty. U.S. Trade Representative Jamieson Greer previously announced that Washington would not automatically extend the agreement, placing it under an annual review process rather than the previously established 16-year trilateral extension.

Trump negotiated USMCA during his first term to replace the North American Free Trade Agreement. The pact took effect in 2020, but Trump later criticized the arrangement and accused Canada of "ripping off the United States of America for years."

Thomas said she remained hopeful that negotiations would prevent the proposed tariff increase. She also pointed to reports that the United States and Canada had resumed trade discussions, including efforts to ease levies on critical materials such as aluminum.

She described her outlook on the negotiations while acknowledging the uncertainty surrounding the trade relationship.

"I am cautiously optimistic" that cooler heads will prevail to avoid the doubling of tariffs, Thomas said.

Honda is Canada's second-largest vehicle producer behind Toyota Motor, according to the source report. The company's substantial Canadian manufacturing presence makes cross-border trade conditions important, particularly because automotive production depends on parts moving repeatedly between facilities across North America.

Honda also reports that more than 60 percent of the vehicles it sells in the United States are manufactured domestically across multiple U.S. assembly plants. Automotive industry officials have nevertheless expressed concerns about uncertainty surrounding tariffs and the future of a regional trade agreement.

Thomas said the proposed tariff structure could leave North American manufacturers at a disadvantage compared with competitors in other markets.

"I never thought I would see the North American region be put at a disadvantage like this," Thomas said.

The Trump administration has negotiated trade agreements with major vehicle-exporting countries, including Japan and South Korea, that provide for 15 percent tariffs on vehicles, according to the source report.