The automotive industry faces uncertainty as a senior executive from Honda Motor warns of severe repercussions if the U. S. and Canada fail to secure a new trade deal by the end of the year. President Donald Trump has threatened to raise tariffs on Canadian vehicles and parts to 50% from the current 25% starting January 1, should negotiations stall.
Jennifer Thomas, senior vice president of corporate affairs at American Honda Motor Co., expressed her concerns at a Reuters automotive conference in Detroit. She emphasized how disastrous such a tariff increase would be for the industry. Thomas is advocating for a trilateral agreement that includes Mexico, similar to the United States-Mexico-Canada Agreement (USMCA), which replaced the North American Free Trade Agreement in 2020.
Trade groups representing Honda and other major U. S. automakers are pushing for a broad deal rather than settling for bilateral arrangements. This follows U. S. Trade Representative Jamieson Greer's announcement that the USMCA won't be automatically extended. Instead, it will undergo annual reviews, replacing the previous 16-year extension. Trump, who brokered the USMCA during his first term, has since criticized Canada for what he calls unfair trade practices.
Despite tensions, Thomas remains cautiously optimistic. She hopes rational discussions will prevent the tariff hike Trump threatened in August. Encouraging signs have emerged, as reports suggest that the U. S. and Canada have resumed trade talks, focusing on cutting levies on key materials like aluminum.
Thomas highlighted the necessity of the trilateral agreement for the prosperity of the U. S. automotive sector, stating that it is integral to the industry's success.
Honda, the second-largest vehicle maker in Canada after Toyota Motor, is especially concerned about the lack of a North American trade deal and the looming tariff uncertainty. Many in the automotive sector share these worries, given the frequent cross-border movement of parts crucial for vehicle manufacturing.
While Honda has significant operations in Canada, the company reports that over 60% of the vehicles it sells in the U. S. are produced domestically at U. S. assembly plants. Thomas expressed disbelief over the potential disadvantages facing the North American region, especially since some overseas countries enjoy better tariff rates.
The Trump administration has secured trade agreements with other nations, including Japan and South Korea, major vehicle exporters to the U. S. These deals include 15% tariffs on vehicles, highlighting the disparity in trade terms.
