By Olivia Hart

A 50% U.S. tariff on Canadian vehicles and parts, due Jan. 1, 2027 if Washington and Ottawa fail to reach a deal, would be catastrophic for the automotive industry, American Honda’s Jennifer Thomas warned.

Thomas spoke in Detroit at a Reuters automotive conference as trade negotiations restarted. The current 25% tariff covers the non-U.S. content of vehicles; doubling the levy would sharpen the competitive disadvantage facing integrated North American production.

What does Honda want from the trade talks?

Thomas said the best outcome would preserve a three-nation U.S.-Mexico-Canada arrangement, modeled on USMCA, rather than a deal confined to Washington and Ottawa. “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. “It’s integral to our success.”

Trade associations representing Honda and major vehicle makers have lobbied for the three-country framework and against bilateral deals. Their position links Honda’s competitiveness to policy across the whole region rather than tariffs on one border alone.

Why did the USMCA renewal process change?

U.S. Trade Representative Jamieson Greer said months ago that Washington would refuse to let the USMCA renew on its own. That decision shifted the agreement into yearly reviews instead of a trilateral renewal lasting 16 years.

The change turns a 16-year renewal framework into annual policy checkpoints for an industry whose supply chains cross all three borders.

Where do the negotiations stand?

Thomas said she was cautiously optimistic that the tariff increase would be avoided. She cited renewed bargaining between the two governments and reported discussion of lower duties on aluminum and similar inputs as grounds for that confidence.

The threat nevertheless remains attached to Jan. 1, 2027 unless the United States and Canada strike a trade agreement. The current levy already reaches non-U.S. content inside Canadian vehicles, making the stakes broader than vehicle assembly alone.

What does a 50% rate change for Honda?

Honda ranks second among vehicle makers operating in Canada, behind only Toyota Motor. Its U.S. assembly plants build more than 60% of the vehicles it sells in the country. That cross-border footprint gives Honda direct exposure to the tariff regime governing North American production and trade.

For Honda, a renewed USMCA would preserve the trilateral operating framework its executives say supports U.S. industry competitiveness. A bilateral agreement would not meet the industry’s stated demand for a three-country arrangement.

How large is the regional disadvantage?

“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 15% rates on their vehicle exports to the United States.

Canada’s current 25% rate is 10 percentage points higher than those 15% terms. The threatened 50% rate would widen that gap to 35 percentage points. The comparison gives Honda’s warning a measurable edge: North American producers would face materially higher duties than selected rivals.

How did talks reach this point?

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

Since then, the two governments have reportedly returned to the bargaining table, with lower duties on aluminum and similar inputs under discussion. Thomas has not abandoned the industry case for a trilateral pact; she has paired it with cautious confidence that the Jan. 1 increase can be avoided.

For Honda, the decision remains conditional rather than resolved: avert the 50% rate through renewed talks, while preserving the three-nation framework that industry groups say remains necessary for competitiveness. Thomas’s recommendation leaves little ambiguity; a trilateral pact remains Honda’s preferred answer even if negotiations soften the immediate tariff threat.