Honda says it may not build new plant in North America without trade deal extension

A Honda executive has indicated the company might not construct a new automobile assembly facility in North America if the existing trade pact, known as USMCA, is not extended. The United States-Mexico-Canada Agreement (USMCA) is currently under negotiation between the Trump administration and both Canada and Mexico.

Honda's Vice President of Operations, Noriya Kaihara, disclosed this during a press conference in Washington. The company is already operating at full capacity in North America and requires an additional plant to meet demand. However, should there be no agreement on USMCA in the future, Honda may need to reconsider its strategy. The company plans to commence operations at the new plant around 2030.

At present, Honda is not transferring the tariff costs to buyers in North America. The U.S. has imposed a 50% tariff on $20 billion worth of Canadian goods, and Canada has retaliated, with the new tariffs set to take effect on September 8.

Last year, Hyundai Motor had also expressed uncertainty about investing due to the lack of clarity on USMCA. The automaker claimed that confirmation of the trade deal's extension would immediately unlock over $20 billion in new American investments, according to a November report.

The longer the uncertainty persists, the slower job creation, site selection, and technology development will occur, stated Honda. Despite the rising interest in Honda's hybrid and fuel-efficient models due to high oil prices since the start of the U.S. war with Iran, Honda's July sales were its best in seven years, with a 36% increase.

However, Honda scrapped its long-term EV sales target in May, including its goal of EVs making up 20% of new car sales by 2030. Instead, the company now aims to produce 15 new hybrids by 2030. In May, Honda also indefinitely postponed its Canada EV project, an $11 billion investment plan to produce EVs and batteries, as well as three planned EV models for the U.S. market.