DETROIT — The auto industry faces a “catastrophic” scenario if the U.S. and Canada fail to agree on a new trade deal by the end of this year, one executive said. honda motor industry warned on Tuesday.
President Donald Trump has threatened to double tariffs on Canadian cars and parts from 25% to 50% on January 1 unless the two countries reach a deal.
“That would be truly devastating for the entire industry,” Jennifer Thomas, American Honda Motor Co.’s executive vice president of operations, said at the Reuters Automotive Conference in Detroit.
Ideally, Thomas said, the two countries would include Mexico in the agreement and reach a trilateral agreement, such as the United States-Mexico-Canada Agreement (USMCA). The trade group representing Honda, along with all major companies in the U.S. auto industry, supports that more comprehensive agreement and opposes the bilateral deal.
Her comments came months after U.S. Trade Representative Jamison Greer announced that the United States would not automatically extend USMCA and would move the trade agreement to an annual review process rather than a 16-year trilateral extension.
During his first term, President Trump negotiated the USMCA, which replaced the North American Free Trade Agreement, and it went into effect in 2020. President Trump later denounced this, accusing Canada of “looting from the United States of America for years.”
Thomas said he is “cautiously optimistic” that calm will prevail to avoid doubling the tariffs that President Trump threatened in August if a deal is not reached.
He said he was encouraged by recent reports that the United States and Canada have resumed trade talks, including reducing taxes on critical materials such as aluminum.
“Our message was clear: For American industry to be competitive, we need to preserve the trilateral agreement,” Thomas said. “It’s essential to our success.”
Honda is Canada’s second largest automobile producer. toyota motorsHowever, many auto stakeholders have expressed concerns about the lack of a North American trade agreement and tariff uncertainty due to the number of parts that regularly cross the border for vehicle production.
Although Honda has established large operations in Canada, the company reports that more than 60% of the vehicles it sells in the United States are manufactured at multiple assembly plants in the United States.
“We never expected the North American region to be at such a disadvantage,” Thomas said, adding that some overseas countries have better tariff rates.
The Trump administration is negotiating trade deals that include a 15% tariff on autos with countries such as Japan and South Korea, which are major exporters of cars to the United States.
