Honda warns 50% Canada auto tariffs would be catastrophic for auto industry

DETROIT — The automotive industry faces a "catastrophic" scenario if the U.S. and Canada cannot reach a new trade deal by the end of this year, an executive with Honda Motor warned Tuesday.

President Donald Trump has threatened to double tariffs on Canadian vehicles and parts from 25% to 50% on Jan. 1 if the two countries don't reach a deal.

"That really would be catastrophic for the entire industry," Jennifer Thomas, senior vice president of corporate affairs at American Honda Motor Co., said during a Reuters automotive conference in Detroit.

Thomas said, ideally, the countries would also include Mexico in the arrangement and reach a trilateral deal, like the United States-Mexico-Canada Agreement, or USMCA. Trade associations representing Honda, as well as every major player in the U.S. automotive industry, have been advocating for that more comprehensive accord and against bilateral arrangements between two countries.

Her comments come months after U.S. Trade Representative Jamieson Greer announced that the U.S. would not automatically extend USMCA, moving the trade pact into an annual review process instead of a 16-year trilateral extension.

Trump negotiated USMCA to replace the North American Free Trade Agreement during his first term and it took effect in 2020. He later soured on it and accused Canada of "ripping off the United States of America for years."

Thomas said she is "cautiously optimistic" that cooler heads will prevail to avoid the doubling of tariffs, which Trump threatened in August if no deal can be reached.

She said she's encouraged by recent reports that the U.S. and Canada have reestablished trade talks, including 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," Thomas said. "It's integral to our success."

Honda is the second largest producer of vehicles in Canada behind Toyota Motor , but many automotive officials have voiced concerns about the lack of a North American trade deal and tariff uncertainty due to the number of parts that regularly cross the borders for vehicle production.

While Honda has established large operations in Canada, the company reports that more than 60% of the vehicles it sells in the U.S. are manufactured domestically across multiple U.S. assembly plants.

"I never thought I would see the North American region be put at a disadvantage like this," Thomas said, adding that some overseas countries have better tariff rates.

The Trump administration has negotiated trade deals with other countries such as Japan and South Korea, which are major exporters of vehicles to the U.S., that include 15% tariffs on vehicles.