by Key warnings
If the United States and Canada fail to reach a trade agreement, Honda may abandon plans to build an eighth assembly plant in North America. The warning came just a few days after Canada withdrew from trade negotiations with the Trump administration, triggering mutual tariffs between the two countries.
Company needs a new plant
Honda says that the capacity of its North American plants is almost exhausted, so the company needs new production. Executive Vice President Noriya Kaihara said:
“If there is no USMCA agreement in the future, we may have to change our direction.”
During a conversation with journalists in Washington, Kaihara noted that the decision on the new plant must be made within the next one to two years, and the plant itself must begin operating by 2030.
Tariff crisis between the US and Canada
After negotiations between the US and Canada were suspended, the Trump administration imposed broad 50 percent tariffs on Canadian goods worth $20 billion. Shortly afterward, Canadian Prime Minister Mark Carney announced an asymmetric response: raising tariffs on American steel and aluminum to 50%, as well as similar tariffs on furniture, clothing, game consoles, smartphones, and other electronics. These measures will affect approximately $20 billion in annual imports from the US and will take effect on September 8.
Buyers will not be affected for now
Kaihara told Reuters that Honda is currently not passing tariff costs on to buyers in North America. However, it is quite logical to assume that the longer these tariffs last, the greater the likelihood that the company will have to raise prices.
What this could mean for negotiations
It is unlikely that Honda’s threat to cancel plans for a new plant will by itself force US and Canadian leaders to quickly resolve the trade conflict. However, if other large corporations, including automakers, also begin to threaten to withdraw investments, governments will have to return to the negotiating table.
Such a public statement by Honda may be part of a broader strategy to pressure politicians. Automakers usually do not comment on possible cancellation of major investment projects without serious reasons. If the company truly believes that a new plant may not materialize because of trade uncertainty, this is a signal not only to governments, but to the entire industry. In the context of rising raw material and logistics costs, additional tariffs only make production planning more difficult, so the issue of trade agreements becomes critical for the long-term strategies of the automotive industry.
