The automotive industry faces severe disruption if the United States and Canada fail to establish a new trade agreement before the end of this year, according to a senior Honda executive. President Trump has indicated that tariffs on Canadian vehicles and parts would increase from 25% to 50% on January 1 if negotiations do not produce results. Jennifer Thomas, senior vice president of corporate affairs at American Honda Motor Co., described such an outcome as catastrophic during remarks at a Reuters automotive conference in Detroit.
Thomas expressed preference for a comprehensive trilateral agreement that would include Mexico, similar to the United States-Mexico-Canada Agreement. Trade associations representing Honda and other major U.S. automakers have consistently advocated for such a broad arrangement rather than bilateral deals between individual countries. Her comments follow the announcement by U.S. Trade Representative Jamieson Greer that the existing USMCA would enter an annual review process instead of receiving automatic renewal for a 16-year extension.
The current USMCA, which Trump negotiated during his first term and which became effective in 2020, replaced the earlier North American Free Trade Agreement. Trump subsequently changed his position on the agreement, characterizing Canada as having exploited U.S. trade relationships. Despite these developments, Thomas indicated cautious optimism that policymakers would reach agreement to prevent tariff increases, citing recent reports of resumed trade discussions between the countries and negotiations regarding levies on critical materials such as aluminum.
Honda operates as the second-largest vehicle producer in Canada, and the company has substantial manufacturing operations across multiple U.S. assembly plants, with over 60% of vehicles sold domestically produced within the country. The lack of clarity on North American trade arrangements has generated widespread concern among automotive officials given the cross-border movement of parts essential to vehicle production. Thomas noted that the potential disadvantage to the North American region contrasts unfavorably with trade agreements the Trump administration has negotiated with countries including Japan and South Korea, which feature 15% vehicle tariffs.
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