The consequences of the upcoming trade war between the US and Canada are already showing. A senior Honda executive said the Japanese automaker might not build an eighth assembly plant in North America unless a key trade deal (USMCA) is extended.
The Trump administration is currently negotiating with Canada and Mexico over the fate of the United States-Mexico-Canada Agreement (USMCA), but at the end of last week, an upcoming trade deal between the US and Canada exploded into a genuine trade war, with absurd export tariffs being launched in every direction.
No new plant without USMCA
Honda Executive Vice President Noriya Kaihara told reporters at a roundtable in Washington that the automaker is close to full production capacity in North America and needs a new factory.
However, “if there is no USMCA agreement in the future, we may have to change our direction,” Kaihara said, adding the company will need to make a decision within a year or two and would like the plant to be running by around 2030.
He said currently Honda is not passing on the costs of tariffs to buyers in North America. The US imposed 50% tariffs on $20 billion worth of Canadian products on Saturday, and Canada said it would retaliate effective September 8.
Last year, Hyundai Motor already told the administration that uncertainty about USMCA was delaying its investment decisions.
“Early confirmation of USMCA’s extension would immediately unlock over $20 billion in new American investments,” the automaker said in November. “Every month of ambiguity slows job creation, site selection, and technology development.”
Honda goes hybrid in the US
With interest in Honda’s hybrid and other fuel-efficient models soaring as oil prices have remained high since the start of the US war with Iran, the automaker had its best July in seven years, with car sales up 36%.
Honda scrapped its long-term EV sales target in May, including its goal of EVs accounting for a fifth of its new-car sales in 2030. It now plans 15 new hybrids by 2030. Whether this will be a good long-term decision remains to be seen. Many analysts see the recent cancellation of its only EV in the US, the popular Prologue, as a big mistake.
The Japanese automaker indefinitely suspended its Canada EV project, an $11 billion investment plan to produce EVs and batteries. It also canceled three planned EVs for the US market. Last year, Honda said it was shifting production of its US-bound five-door Civic hybrid model from Japan to Indiana.
