Honda Warns Doubling Canada Tariffs to 50% Would Be 'Catastrophic'

Honda says a doubling of U.S. tariffs on Canadian vehicles and parts to 50% would be "catastrophic for the entire industry." Jennifer Thomas, senior vice president of corporate affairs at American Honda Motor Co., delivered the warning Tuesday at a Reuters automotive conference in Detroit. President Donald Trump has threatened to raise the levies from 25% to 50% on Jan. 1 unless Washington and Ottawa reach a new trade deal by year-end. A 50% tariff would be double the current rate and far above the 15% vehicle tariffs the administration has granted Japan and South Korea in recent bilateral pacts.

What is Honda demanding instead?

Thomas said the ideal outcome is a trilateral agreement that includes Mexico, modeled on the United States-Mexico-Canada Agreement. Trade associations representing Honda and every major player in the U.S. automotive industry have lobbied for that comprehensive accord and against bilateral deals between two countries.

"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 stakes are structural, not rhetorical. Parts regularly cross U.S. borders multiple times during vehicle production, so automotive officials have voiced concern that tariff uncertainty at any border raises costs across the supply chain. Honda is the second-largest vehicle producer in Canada, behind Toyota Motor. Yet the company reports that more than 60% of the vehicles it sells in the U.S. are manufactured domestically across multiple American assembly plants — a hedge, but not immunity, against Canadian tariff exposure.

Why is USMCA suddenly in question?

U.S. Trade Representative Jamieson Greer announced earlier this year that the U.S. would not automatically extend USMCA, moving the 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; it took effect in 2020. He later soured on the deal and accused Canada of "ripping off the United States of America for years."

That reversal leaves the industry without the certainty USMCA was designed to provide. The annual review structure means the pact can face renegotiation pressure every year rather than resting on a fixed horizon.

Can a deal still happen?

Thomas said she is "cautiously optimistic" that cooler heads will prevail and the threatened doubling — which Trump issued in August if no deal is reached — can be avoided. She pointed to recent reports that the U.S. and Canada have reestablished trade talks, including easing levies on critical materials such as aluminum. Optimism, notably, is not the same as an agreement; no deal terms have been announced.

Thomas also flagged the competitive irony of the current stance. "I never thought I would see the North American region be put at a disadvantage like this," she said, noting that some overseas countries now enjoy better tariff rates. The Trump administration has already negotiated deals with Japan and South Korea — both major vehicle exporters to the U.S. — that cap vehicle tariffs at 15%, well below what Canadian-built products could face.

The arithmetic is blunt: vehicles and parts from Canada could carry a tariff three times higher than those from Japan or South Korea. For an industry that moves components across borders repeatedly before a finished car rolls off the line, that gap compounds at every crossing. Whether Washington and Ottawa close a deal before Jan. 1 — and whether Mexico is included — will determine if Honda's warning becomes a cost reality.