DETROIT — The North American automotive industry faces a potentially "catastrophic" scenario if the United States and Canada fail to secure a comprehensive new trade agreement before the end of the year, a high-ranking Honda Motor executive warned on Tuesday.
Speaking at a Reuters automotive conference in Detroit, Jennifer Thomas, senior vice president of corporate affairs at American Honda Motor Co., cautioned that the sector stands on precarious ground as a critical year-end deadline approaches. The warning underscores escalating anxieties across the manufacturing sector regarding the future of cross-border supply chains, which have relied on seamless integration for decades to build vehicles efficiently across the continent.
At the heart of the looming crisis is a stark threat from President Donald Trump, who has vowed to double existing tariffs on Canadian vehicles and automotive parts from 25% to 50% starting January 1 if the two neighboring nations cannot successfully negotiate a fresh trade accord.
"That really would be catastrophic for the entire industry," Thomas told industry leaders and journalists gathered in Detroit, emphasizing the sweeping disruptions such a dramatic tariff hike would inflict on automotive production lines, suppliers, and consumers alike.
Ideally, Thomas said, the ongoing negotiations would expand beyond a strictly bilateral framework between Washington and Ottawa to include Mexico, thereby preserving a trilateral arrangement akin to the United States-Mexico-Canada Agreement, or USMCA. Major trade associations representing Honda, alongside virtually every major player in the domestic U.S. automotive manufacturing landscape, have consistently advocated for a broader, trilateral accord rather than fragmented bilateral agreements that could complicate regional supply chains.
The current uncertainty follows a pivotal shift in trade policy months earlier. U.S. Trade Representative Jamieson Greer announced that the federal government would not automatically extend the USMCA in its traditional format, effectively moving the foundational trade pact into an annual review process instead of maintaining a stable 16-year trilateral extension.
The USMCA itself was originally negotiated by the Trump administration during his first term to replace the legacy North American Free Trade Agreement, formally taking effect in 2020. However, the political landscape surrounding the pact has since shifted significantly. President Trump later soured on the agreement, publicly accusing Canada of taking unfair advantage of the United States and "ripping off the United States of America for years."
Despite the high stakes and turbulent political rhetoric, Thomas noted that she remains "cautiously optimistic" that cooler heads will ultimately prevail to avert the steep tariff escalation that the administration first threatened back in August.
She pointed to recent, encouraging signs indicating that Washington and Canada have successfully reestablished formal trade discussions. Notably, recent developments include the easing of levies on vital manufacturing materials such as aluminum, a crucial component in modern vehicle construction.
"Our message has been clear: We need that trilateral agreement to stay in place in order for the U.S. industry to be competitive," Thomas said during her address. "It’s integral to our success."
Honda maintains a significant operational footprint across North America. The Japanese automaker stands as the second-largest producer of vehicles in Canada, trailing only Toyota Motor. Because modern vehicle manufacturing relies heavily on specialized parts crossing international borders multiple times before a final car rolls off the assembly line, automotive executives throughout the region have repeatedly voiced deep concerns over the absence of a stable, long-term trade framework and the growing unpredictability of tariff policies.
Even with its robust manufacturing presence in Canada, Honda maintains deeply rooted operations within the United States. According to the company, more than 60% of the vehicles it sells to consumers in the U.S. market are manufactured domestically across multiple assembly plants located directly within the country. This extensive domestic production underscores how deeply integrated foreign-headquartered automakers have become within the broader U.S. industrial economy.
Nevertheless, Thomas expressed frustration at the structural disadvantages the current trade disputes have inadvertently created for North American operations compared to competitors operating elsewhere in the global marketplace.
"I never thought I would see the North American region be put at a disadvantage like this," Thomas said, pointing out that certain overseas countries currently enjoy more favorable tariff rates when exporting vehicles into the United States.
As an example, the Trump administration has successfully negotiated bilateral trade agreements with other key international partners, such as Japan and South Korea. Both nations rank among the world’s major exporters of passenger vehicles to the U.S. market, and their current trade arrangements include a significantly lower vehicle tariff rate set at 15%.
With the calendar rapidly winding down toward the January 1 deadline, automakers, suppliers, and policymakers face intense pressure to resolve their differences and protect an interconnected industrial ecosystem that supports millions of jobs across the United States, Canada, and Mexico.
