Honda plans to increase production in the United States to meet 90% of unit sales.

Honda Motor is developing a plan to transfer the production of its vehicles from Mexico and Canada to the United States in response to the Donald Trump administration’s additional 25% tariff on all imported cars. According to the report by the Nikkei newspaper on Tuesday, the Japanese automaker intends to increase its vehicle production in the United States by up to 30% over the next two to three years to meet 90% of its unit sales in the country.

Under the US-Mexico-Canada Agreement (USMCA), goods traded among the three countries can enjoy zero-tariff treatment under certain conditions. Japanese automakers have utilized this agreement to establish a framework for exporting vehicles from Mexico and Canada, where labor costs are lower, to the United States.

However, since goods that comply with the USMCA agreement are subject to additional tariffs, Honda is facing adverse effects due to the tariffs, despite the potential reduction depending on the percentage of U.S. content in the final product. As a result, Honda is adjusting its production structure in these three countries accordingly.

Honda sells about 1.42 million vehicles annually in the United States, accounting for nearly 40% of its global sales, with 1 million vehicles or 70% being manufactured in the United States. By increasing local production by 30%, Honda will be able to produce vehicles equivalent to 90% of its sales in the U.S.

Approximately 500,000 Honda vehicles are imported into the United States, with 300,000 coming from Canada. The CR-V SUV and Civic sedan, produced in Canada, will be targets for relocation to production in the United States. These two models are also manufactured in the U.S.

Given that production relocation needs to be phased along with adjustments to the parts supply chain, it is estimated that it will take at least two years to complete the transition. Additionally, Honda plans to shift production of the HR-V compact SUV from Mexico to the United States, requiring new investments as the model is not currently produced in the U.S.

Following the announcement of new tariffs on imported cars by the Trump administration, Japanese automakers Toyota and Honda have both stated their intention to temporarily maintain vehicle prices to avoid market disruptions. A representative from Toyota’s North American headquarters mentioned that to prevent potential chaos from price increases, “we will maintain the current business operations for now” and aim to retain current quantities and prices of parts purchased from suppliers.

Honda also intends to delay immediate price hikes after the new tariffs take effect. A senior executive from the company stated that automakers will first observe market conditions. The Japan Automobile Manufacturers Association (JAMA) is pressuring the Japanese government and ruling coalition for support in this scenario.