Honda warned 50% Canada auto tariffs would be catastrophic for the industry

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American Honda's Jennifer Thomas said the industry needs a trilateral U.S.-Mexico-Canada pact as Trump's Jan. 1 tariff deadline nears

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Jennifer Thomas, a senior vice president at American Honda $HMC Motor Co., the U.S. arm of Honda Motor, warned on Tuesday that a 50% U.S. tariff on Canadian vehicles and parts would be "catastrophic for the entire industry," according to CNBC.

Thomas spoke at a Reuters automotive conference in Detroit. President Donald Trump has warned that the tariff on Canadian vehicles and parts, now 25%, will double to 50% on Jan. 1 if the two countries do not strike a trade deal.

Thomas said the best outcome would add Mexico so the pact becomes a three-nation accord modeled on the United States-Mexico-Canada Agreement, or USMCA. "Our message has been clear: We need that trilateral agreement to stay in place in order for the U.S. industry to be competitive," she said, according to CNBC. "It's integral to our success."

Thomas said she is "cautiously optimistic" that the tariff increase will be avoided. She said news that the two governments are back at the bargaining table, reportedly with lower duties on aluminum and similar inputs under discussion, gives her hope, according to CNBC.

Trade associations that speak for Honda and for each of the major companies across the American auto sector have lobbied for the three-country agreement and against deals between just two nations, according to CNBC. U.S. Trade Representative Jamieson Greer said months ago that Washington was refusing to let USMCA renew on its own, according to CNBC. That sent the agreement into yearly reviews, rather than a trilateral renewal lasting 16 years.

Honda ranks second among vehicle makers operating in Canada, trailing only Toyota $TM Motor, according to CNBC. Honda says its U.S. assembly plants build over 60% of the vehicles it sells in the country.

"I never thought I would see the North American region be put at a disadvantage like this," Thomas said, noting that certain foreign nations enjoy lower tariff levels. The Trump administration's deals with Japan and South Korea set a 15% rate on their vehicle exports, according to CNBC.

Trump threatened in August to raise tariffs on Canadian autos and parts to 50% on Jan. 1, 2027, after trade negotiations collapsed. The current 25% rate covers the non-U.S. content of vehicles. At the time, Canadian Prime Minister Mark Carney suspended trade talks and said Canada would match U.S. tariffs dollar for dollar.

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