The automotive industry faces significant disruption if the United States and Canada do not finalize a new trade agreement before the end of this year, according to Jennifer Thomas, senior vice president of corporate affairs at American Honda Motor Co. President Donald Trump has announced plans to increase tariffs on Canadian vehicles and automotive parts from 25% to 50% starting January 1 if negotiations do not succeed.
Thomas characterized the proposed tariff increase as devastating to the entire sector during remarks at a Reuters automotive conference in Detroit. She expressed a preference for a trilateral arrangement involving Mexico alongside the two countries, similar to the existing United States-Mexico-Canada Agreement, or USMCA. Major trade associations representing Honda and other leading U.S. automotive manufacturers have consistently advocated for such comprehensive multilateral agreements rather than bilateral arrangements between pairs of nations.
The current situation developed after the U.S. Trade Representative announced that the USMCA would no longer receive an automatic extension. Instead, the agreement has transitioned to an annual review process rather than the originally planned 16-year trilateral extension. Trump originally negotiated the USMCA as a replacement for the North American Free Trade Agreement during his previous administration, and the agreement entered into force in 2020. However, Trump subsequently expressed dissatisfaction with the accord, claiming that Canada had been unfairly benefiting from the arrangement.
Thomas indicated cautious optimism that negotiations would ultimately prevent the tariff doubling, which Trump first threatened in August. She noted encouragement from reports that the U.S. and Canada have resumed trade discussions, particularly regarding relief on tariffs affecting critical materials such as aluminum. Honda operates as Canada’s second-largest vehicle manufacturer after Toyota Motor, and the company manufactures more than 60% of the vehicles it sells in the U.S. domestically across multiple assembly facilities. Thomas emphasized that a trilateral trade framework remains essential for maintaining competitiveness, noting that some overseas countries currently enjoy more favorable tariff treatment under separate trade agreements negotiated by the Trump administration with nations including Japan and South Korea, which feature 15% vehicle tariffs.
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