American Honda Motor Co. warned on Tuesday that doubling U.S. tariffs on Canadian vehicles and parts to 50 percent would be catastrophic for the automotive industry, as trade negotiators resumed talks following months of stagnation over heavy-duty vehicle levies and North American trade rules.
American Honda Motor Co. Warns of Industry Collapse Over 50 Percent Tariffs
The automotive industry faces a severe crisis if the United States and Canada fail to secure a trade agreement before the end of the year. President Donald Trump has vowed to double existing tariffs on Canadian vehicles and parts from 25 percent to 50 percent starting Jan. 1 if negotiations stall.
Speaking at a Reuters automotive conference in Detroit, Jennifer Thomas, senior vice president of corporate affairs at American Honda Motor Co., did not mince words about the proposal. That really would be catastrophic for the entire industry,
Thomas said.
The threat stems from deepening friction over North American trade. Trade associations representing major players across the U.S. auto sector are pushing for a comprehensive trilateral arrangement modeled on the United States-Mexico-Canada Agreement, rather than bilateral deals. Honda operates extensive manufacturing networks across Canada—ranking as the country’s second-largest vehicle producer behind Toyota Motor—while maintaining multiple U.S. assembly plants that consume cross-border parts daily.
Heavy-Duty Vehicle Tariffs Derail Trade Negotiations
The current talks follow a near-breakthrough in August, when the two sides appeared close to a deal that would have reduced U.S. auto tariffs from 25 percent to 15 percent. Negotiations derailed after Canadian officials discovered American negotiators did not intend to apply that reduced rate to heavy-duty vehicles, such as Ford’s F-350 series manufactured in Oakville, Ontario. Canada subsequently walked away from the table, prompting Trump’s vow to raise tariffs to 50 percent.
Honda warns 50% Canada auto tariffs would be catastrophic for auto industry https://t.co/6zj8dFgNeI
Now, mounting economic pressure has brought negotiators back to the table. Multiple media outlets report that substantive talks have resumed, though trade sources caution that predicting an agreement remains difficult despite a softening American tone.
For those that are saying don’t don’t take a deal that’s less than perfect and then lock in that new number, there are other people that are saying if you don’t make progress, you’re locking in the higher number that we’re at now, and maybe an even higher number on Jan. 1.
Unnamed Canadian trade source, via iPolitics
Trade Policy Shifts and the Move Away From the USMCA
The current instability marks a sharp departure from the previous framework established during Trump’s first term. Trump negotiated the USMCA to replace the North American Free Trade Agreement, with the pact taking effect in 2020. However, relations cooled as the administration accused Canada of ripping off the United States of America for years.
Tensions escalated earlier this year when U.S. Trade Representative Jamieson Greer announced that Washington would bypass an automatic 16-year trilateral extension of the USMCA, transitioning the trade pact into an annual review process instead.
Despite these headwinds, industry leaders remain watchful. Thomas stated that she is cautiously optimistic that cooler heads will prevail, pointing to recent trade talks involving the easing of levies on critical materials like aluminum as an encouraging sign.