Honda Motor Co. is considering shifting a significant portion of its vehicle production from Mexico and Canada to the United States, amid escalating trade tensions triggered by a new 25% tariff on imported automobiles announced by US President Donald Trump, Nikkei reported on Tuesday.
The Japanese automaker aims to have 90% of cars sold in the US built locally, according to the report.
The company is reportedly looking to increase its US production capacity by as much as 30% over the next two to three years.
The move would help shield the company from the hefty import levy, which could otherwise cost Honda an estimated $4.57 billion annually.
Honda declined to comment on the report, saying the details had not been announced by the company.
Even before the tariff was made official, Honda had taken steps to mitigate the risk of higher import costs.
Reuters earlier reported that the next-generation Civic hybrid will be manufactured in Indiana, rather than in Mexico, where production had been originally planned.
The United States remains Honda’s largest market, accounting for nearly 40% of its global vehicle sales.
Last year, Honda sold approximately 1.4 million cars in the US, with about 1 million already built domestically.
Despite the provisions of the US-Mexico-Canada Agreement (USMCA), which allows for tariff-free trade under certain conditions, the 25% tariff applies even to vehicles that meet USMCA origin requirements.
While increasing US-made content can reduce some of the tariff impact, it cannot fully eliminate it, the Nikkei report said.
To ramp up production in the US, Honda is said to be weighing operational changes including adding a third work shift, expanding weekend production, and hiring additional workers.
However, the reconfiguration is expected to take at least two years due to the complex nature of realigning supply chains and factory capacities.
Shares of automakers worldwide rose following remarks from President Trump suggesting the administration might consider temporary exemptions from the tariffs.
“I’m looking at something to help some of the car companies,” Trump said in Washington, adding that firms “need a little bit of time” to restructure their manufacturing operations.
The prospect of relief buoyed stocks across the sector.
Toyota and Honda gained 3.7% and 3.6% respectively, while Tata Motors rose 4.7% and Hyundai climbed 4.3%.
European carmakers, including Volkswagen, Mercedes-Benz, and BMW, also posted gains of over 2%.
Automakers have begun reevaluating their production strategies in response to the trade policy shift.
Stellantis has announced temporary shutdowns at its Windsor and Toluca plants. Ford is leaning on domestic inventory, launching a customer-wide “From America for America” pricing initiative.
General Motors is boosting output at its Fort Wayne, Indiana, plant to meet expected demand for light-duty trucks.
The industry now faces a period of strategic recalibration as it adapts to the new economic landscape shaped by Washington’s evolving trade agenda.
