Detroit — A Honda executive warned on Tuesday that if the United States and Canada cannot reach a new trade agreement by the end of this year, the automotive industry will face a "catastrophic" situation.

U.S. President Donald Trump threatened that if no agreement is reached between the two countries, he will raise tariffs on Canadian cars and parts from 25% to 50% on January 1st.

Jennifer Thomas, Senior Vice President of Corporate Affairs at Honda Motor Company of America, stated at the Reuters Auto Conference held in Detroit: "This would truly be catastrophic for the entire industry."

Thomas said that ideally, both countries should also include Mexico in the arrangements to reach a trilateral agreement similar to the United States-Mexico-Canada Agreement ( USMCA ). Trade associations representing Honda and all major participants in the U.S. automotive industry have been advocating for such a more comprehensive agreement and opposing bilateral arrangements between the two countries.

At the time of her remarks, several months had passed since U.S. Trade Representative Jameson Giller announced that the United States would not automatically renew USMCA; this means that the trade agreement will proceed to an annual review process, rather than being extended for another 16 years in a tripartite manner.

During his first term, Trump negotiated the establishment of USMCA to replace the North American Free Trade Agreement (NAFTA), which came into effect in 2020. Later on, he became more critical of this agreement and accused Canada of taking advantage of the United States for many years.

Thomas expressed that she is "cautiously optimistic," believing that all parties will eventually calm down and avoid a doubling of tariffs; Trump threatened in August that such a measure would be taken if no agreement could be reached.

She said that recent reports indicating that the United States and Canada have restarted trade negotiations, which include relaxing tariffs on key materials such as aluminum, have encouraged her.

"Our message is clear: in order to keep American industry competitive, we need for that trilateral agreement to continue to exist," Thomas said, "It is crucial to our success."

Honda is the second-largest automobile manufacturer in Canada, behind Toyota. However, many automotive industry officials are concerned about the lack of trade agreements in North America and the uncertainty surrounding tariffs, as a large number of parts are required to cross borders frequently during the automobile production process.

Although Honda has established a large business in Canada, the company stated that over 60% of the cars it sells in the United States are produced at multiple assembly plants within the U.S.

"I never thought I would see North America in such a disadvantaged position," Thomas said, adding that some overseas countries have even lower tariff rates.

The Trump administration has reached trade agreements with other countries such as Japan and South Korea, which are major exporters of automobiles to the United States. The agreements impose a 15% tariff on automobiles.