As Canada and Mexico braced for 25% tariffs on Tuesday, and China for another 10%, Honda became one of the first companies to cave – scrapping plans to produce its new Civic in Mexico in favor of Indiana, according to a report.
The Japanese auto giant had initially planned to manufacture the next-generation Civic in Guanajuato, Mexico, starting in November 2027, sources familiar with the matter told Reuters.
Now, Honda plans to manufacture the new Civic in Indiana, starting in May 2028 — churning out around 210,000 vehicles each year, a source told the outlet.
Honda’s capitulation reflects the immediate impact of Trump’s pledge to return manufacturing to the US by imposing tariffs on rival nations, experts told The Post.
“I think Trump has been effective at using tariffs, and the threat of tariffs, to get more made-in-America jobs here,” Stephen Moore, economist and senior fellow at The Heritage Foundation, told The Post. “This was a victory for Trump.”
Investors on Wall Street, however, were not taking any victory laps.
All three major indexes finished sharply lower. The blue-chip Dow dove 649 points, or 1.5%, while the S&P 500 fell 105, or 1.8% and the tech-heavy Nasdaq sank 497, or 2.8%.
Honda was initially eyeing making the Civic in Mexico or Canada because of cheaper production costs – before deciding on Indiana, Reuters reported.
The company declined to comment on the report, but said it has flexibility to “produce products in each region based on customer needs and market conditions.”
Other automakers that already have facilities in the US may also follow Honda’s lead by expanding their production capabilities, or re-opening closed factories, Jonathan Ernest, economics professor at Case Western Reserve University, told The Post.
BMW, for example, which has its largest US plant in South Carolina, could ramp up production at existing sites on a dime, he said.
Volkswagen, meanwhile, is reportedly weighing US production sites for its Audi and Porsche brands to avoid proposed tariffs on the European Union, according to a German news outlet.
In January, Stellantis reversed plans to shutter its Illinois facility after its chairman, John Elkann, met with Trump and promised to boost US manufacturing jobs.
But even if companies move manufacturing to the US to avoid the 25% levy, higher labor and production costs could be passed along to the consumer.
In the near term, car prices in the US could surge as much as $12,000 after the tariffs take effect, according to a new study from consulting firm Anderson Economic Group.
The tariffs are a double-edged sword, according to experts.
They could stoke inflation and raise prices, especially in the auto industry, but they could also create more well-paying manufacturing jobs, Moore told The Post.
Honda currently sends about 80% of its Mexican output to the United States — the world’s second-largest auto market behind China.
The company, which had been in talks with Nissan about a possible merger before the deal was scrapped, sold nearly 1.5 million cars and trucks in the United States last year.
Those sales included more than 240,000 of its affordable Civics — representing a 21% rise from the year before, the company said in January.
Shinji Aoyama, Honda’s chief operating officer, had warned last year that the carmaker would have to consider moving production to the US if Trump imposed tariffs on vehicle imports.
Currently, around 40% of the vehicles that Honda sells in the US are imported from Mexico and Canada.
Honda also exports about 60,000 cars made in the US to Mexico or Canada. If the neighboring countries respond with retaliatory tariffs, the Japanese automaker could face even more cost increases.
Trump said Monday that Canada and Mexico have “no room left” for talks to avoid the new 25% tariff — with the duty set to begin at midnight alongside a new 20% tariff on Chinese goods.
“On the tariffs, is there any room left for Canada and Mexico to make a deal before midnight?” a journalist asked Trump at the White House.
“No room left for Mexico or for Canada,” Trump replied.
“No, the tariffs, you know, they’re all set. They go into effect tomorrow.”
Trump added that the new tariff on Chinese-made goods would be 20% — double the amount he previously threatened — which White House aides subsequently confirmed.
China, Mexico and Canada are America’s top three sources of imports and collectively send almost half of all goods that flow into the US.
Trump last month delayed the implementation of the 25% tariff against goods from neighboring countries when Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum rushed to reassure him they would crack down on illegal immigration and fentanyl smuggling.
Although illegal immigration busts along the US-Mexico border hit a 25-year low in February, Trump said Monday he was still displeased with progress on stopping fentanyl, which can kill in extremely small doses.
“So you understand, vast amounts of fentanyl have poured into our country from Mexico, and as you know, also from China, where it goes to Mexico and goes to Canada,” he said.
China is the primary producer of the fentanyl that killed at least 279,000 Americans over the past four years, according to Centers for Disease Control and Prevention data last updated in September.
Although Trump specified fentanyl as the reason for proceeding with tariffs, he also has described the measures as beneficial to American businesses.
The president has enacted stiffer new tariffs on steel and aluminum — saying it was “the beginning of making America rich again” — while hinting at looming action on copper, lumber, pharmaceuticals and computer chips.
The president has dismissed concern about tariffs fueling inflation, pointing to low rates of increase in consumer costs during his first-term trade standoffs, particularly with China.
Trump also wrote on social media Monday that he would be adopting agricultural tariffs on April 2, which a White House official told The Post was a reference to his looming initiative to slap “reciprocal” levies on other countries, including European allies and Japan.
“We don’t need the products that they have,” Trump said Jan. 30 of Canadian and Mexico imports — adding a day later: “There could be some temporary short-term disruption, and people will understand that.”
Trudeau and Sheinbaum did not immediately comment after Trump followed through on the tariff plan.
Trudeau had ordered 25% tariffs on the US in early February, but agreed to pause the plan for 30 days.
Sheinbaum had said she planned to levy retaliatory tariffs on the US, though she has not provided details on the size and timing of the taxes.
With Post wires
