Honda Executive: 50% Tariffs on Canadian Cars Will Be Catastrophic

Jennifer Thomas, senior vice president of corporate affairs at American Honda Motor Co., described a potential 50% tariff on Canadian vehicles as catastrophic for the U.S. automotive industry. She made the assessment during a Reuters automotive conference in Detroit on Tuesday, citing the risk that trade friction will disrupt complex supply chains.

President Donald Trump has threatened to double tariffs on Canadian vehicles and parts from 25% to 50% on January 1 if the two nations fail to reach a new agreement. The threat, first issued in August, creates an urgent deadline for negotiators to finalize terms before the new year begins.

Thomas argued that a bilateral deal is insufficient and that the U.S., Canada, and Mexico should secure a trilateral arrangement similar to the United States-Mexico-Canada Agreement, or USMCA. She noted that trade associations representing Honda and other major players have consistently advocated for this comprehensive model to maintain competitive pricing.

The current uncertainty stems from a shift in policy announced by U.S. Trade Representative Jamieson Greer. He stated that the U.S. will not automatically extend the USMCA, moving the pact into an annual review process instead of a 16-year trilateral extension. Trump originally negotiated the USMCA to replace NAFTA, but he later accused Canada of taking advantage of the United States for years.

Despite the threats, Thomas expressed cautious optimism that cooler heads will prevail. She pointed to recent reports that the U.S. and Canada have reestablished trade talks, including moves to ease levies on critical materials like aluminum. She stated that a trilateral agreement is integral to the success of the U.S. industry.

Honda is the second-largest vehicle producer in Canada, behind Toyota. However, the company reports that more than 60% of the vehicles it sells in the U.S. are manufactured domestically across multiple assembly plants. Thomas observed that some overseas countries, including Japan and South Korea, currently face 15% vehicle tariffs under deals negotiated by the Trump administration, putting the North American region at a relative disadvantage.

The next major milestone is the January 1 deadline for the tariff increase. Until then, officials in both countries will continue discussions aimed at preventing the doubling of rates on vehicles and parts that cross the border regularly.