DETROIT — The auto industry faces a “catastrophic” scenario if the United States and Canada fail to reach a new trade deal by the end of this year, a top executive said. Honda engine warned Tuesday.
President Donald Trump has threatened to double tariffs on Canadian vehicles and parts from 25% to 50% on January 1 if the two countries do not reach an agreement.
“It would be truly catastrophic for the entire industry,” Jennifer Thomas, senior vice president of corporate affairs at American Honda Motor Co., said at a Reuters auto conference in Detroit.
Thomas said that ideally, countries would also include Mexico in the deal and come to a trilateral agreement, like the United States-Mexico-Canada Agreement, or USMCA. Trade associations representing Honda, as well as all major players in the U.S. auto industry, have advocated for a more comprehensive agreement and against bilateral agreements between two countries.
His comments come months after U.S. Trade Representative Jamieson Greer announced that the United States would not automatically extend the USMCA, moving the trade deal to an annual review process instead of a 16-year trilateral extension.
Trump negotiated the USMCA to replace the North American Free Trade Agreement during his first term and it took effect in 2020. He later soured and accused Canada of “ripping off the United States of America for years.”
Thomas said she was “cautiously optimistic” and believed cooler heads would prevail to avoid the doubling of tariffs, which Trump had threatened in August if no deal could be reached.
She said she was encouraged by recent reports that the United States and Canada have restored trade negotiations, including easing tariffs on key materials such as aluminum.
“Our message has been clear: We need this trilateral agreement to remain in place for American industry to be competitive,” Thomas said. “It’s an integral part of our success.”
Honda is the second largest vehicle producer in Canada behind Toyota engineBut many auto industry officials have expressed concerns about the lack of a North American trade deal and pricing uncertainty due to the number of parts that routinely cross borders for vehicle production.
Although Honda has established significant operations in Canada, the company reports that more than 60% of the vehicles it sells in the United States are manufactured domestically in several American assembly plants.
“I never thought I would see the North American region be at such a disadvantage,” Thomas said, adding that some overseas countries have better tariff rates.
The Trump administration has negotiated trade deals with other countries like Japan and South Korea, which are major exporters of vehicles to the United States, that include 15% tariffs on vehicles.
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