Honda Motor Co. said it may reconsider plans to build a new assembly plant in North America if the U.S.-Mexico-Canada Agreement (USMCA) is not extended, citing uncertainty over trade policy as a key risk to long-term investment decisions.
Executive Vice President Noriya Kaihara stated that without a future USMCA agreement, the company may have to alter its direction regarding the proposed eighth North American plant, which is intended to address capacity constraints. The facility, targeted for operation around 2030, would be Honda’s latest expansion in the region, where it currently operates seven assembly plants across the U.S., Canada, and Mexico.
The warning comes as trade tensions escalate following the U.S. imposition of 50% tariffs on Canadian goods, effective Saturday. Canada has announced retaliatory measures set to take effect September 8, further complicating cross-border supply chains. Honda, which does not pass tariff costs to North American customers, has yet to specify how the measures might impact its operations or pricing strategy.
Honda’s capacity concerns have been amplified by strong demand for hybrids and fuel-efficient models amid elevated oil prices since the U.S. conflict with Iran began. The automaker reported its best July in seven years, with car sales up 36% year-over-year. However, the company has shifted its focus away from pure electric vehicles, scrapping a long-term EV sales target that had aimed for EVs to represent 20% of new car sales by 2030. Instead, Honda plans to introduce 15 new hybrid models by 2030.
The company has already taken steps to adjust its production footprint, moving U.S.-bound Civic hybrid production from Japan to its Indiana plant last year. Earlier this year, Honda indefinitely suspended a $11 billion EV and battery project in Canada and canceled three planned EV models for the U.S. market. An automaker executive cited in November noted that early confirmation of a USMCA extension would unlock over $20 billion in new American investments, warning that prolonged ambiguity delays job creation, site selection, and technology development.
Honda must finalize its decision on the new plant within the next year or two, executives said, as the company evaluates long-term operational and trade policy risks.
