DETROIT – The auto industry faces a “catastrophic” scenario if the United States and Canada cannot reach a new trade deal by the end of this year, a Honda Motor executive 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. “That would really be catastrophic for the entire industry,” Jennifer Thomas, senior vice president of corporate affairs at American Honda Motor Co., said during a Reuters automotive conference in Detroit. Thomas said that, ideally, the countries would also include Mexico in the agreement and reach a trilateral agreement, such as the United States-Mexico-Canada Agreement, or USMCA. Trade associations representing Honda, as well as all major players in the American auto industry, have been advocating for such 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 U.S. would not automatically extend the USMCA, moving the trade pact 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 went into effect in 2020. He later became bitter. and accused Canada of “defrauding the United States of America for years.” Thomas said he is “cautiously optimistic” that calm will prevail to avoid a doubling of tariffs, which Trump threatened in August if a deal can’t be reached. She said she is encouraged by recent reports that the United States and Canada have revived trade talks, including easing taxes on critical materials like aluminum. “Our message has been clear: We need to keep that trilateral agreement in place so that American industry can be competitive,” Thomas said. “It’s integral to our success.” Honda is the second-largest vehicle producer in Canada behind Toyota Motor, but many auto officials have expressed concern about the lack of a North American trade deal and tariff uncertainty due to the number of parts that regularly cross borders for vehicle production. While Honda has established large operations in Canada, the company reports that more than 60% of the vehicles it sells in the U.S. are manufactured domestically at multiple U.S. assembly plants. “I never thought I would see the North American region at a disadvantage,” Thomas said, adding that some overseas countries have better tariff rates. The Trump administration has negotiated trade deals with other countries such as Japan and South Korea, which are major vehicle exporters to the United States, which They include 15% tariffs on vehicles.
