Honda Executive Warns Canada Tariff Hike Would Devastate Auto Industry

The automotive sector faces a devastating outcome if the United States and Canada fail to secure a new trade agreement by the end of the year. President Donald Trump has warned that taxes on Canadian cars and components could rise from 25 percent to 50 percent on January 1 if an agreement is not met.

Industry Warning

Jennifer Thomas, senior vice president of corporate affairs at American Honda Motor Co., stated at a Detroit conference that this jump would devastate the whole market. She noted that industry groups prefer a three-way pact involving Mexico, similar to the United States-Mexico-Canada Agreement. U.S. Trade Representative Jamieson Greer earlier announced that the USMCA will move to a yearly review instead of an automatic 16-year extension. Trump negotiated the USMCA in his first term, but he later criticized Canada over trade.

Talks and Production

Thomas remains cautiously hopeful that leaders will avoid the tax hike that Trump threatened in August. She pointed to recent news that both nations have restarted trade discussions and lowered taxes on essential materials like aluminum. Honda ranks as the second-largest vehicle maker in Canada behind Toyota Motor, while over 60 percent of the vehicles Honda sells in the U.S. are built domestically. Thomas also noted that some overseas countries currently enjoy better tariff rates of 15 percent.

Context

Trade deals between nations shape the cost of making cars by allowing parts to move across borders without heavy taxes. Changes to these agreements can alter production costs and shift where companies decide to build their vehicles.