Tariffs Turn Up the Heat! Honda Pulls Out and Goes All the Way with Indiana!

Honda has made a bold move in response to rising costs and looming tariffs, becoming the first major Japanese automaker to take concrete action. The company had originally planned to manufacture the next-generation Civic in Guanajuato, Mexico, but those plans have changed. According to sources familiar with the matter, Honda will now produce the Civic in Indiana, starting in May 2028, with an expected annual output of 210,000 units.

The shift comes as manufacturing expenses in Indiana and Canada continue to climb. Mexico was initially chosen as a cost-effective alternative, but concerns over potential tariffs forced Honda to rethink its strategy. If demand exceeds Indiana’s production capacity, Honda will explore importing from countries not affected by tariffs, one of the sources said.

Since this information has not been publicly disclosed, all sources spoke on condition of anonymity. Honda has declined to comment on the changes, stating only that it will continue evaluating global demand and business conditions to determine the best production strategy. Mexico has long been a key manufacturing hub for automakers due to its lower production costs.

Currently, about 80% of Honda’s Mexican-made vehicles are shipped to the U.S., the second-largest auto market in the world after China. Honda’s Chief Operating Officer, Shinji Aoyama, previously warned that if the U.S. imposed permanent tariffs, the company would need to reassess its production strategy. The situation highlights how disruptive trade policies can be, especially in industries where long-term investments and complex production lines limit rapid shifts in manufacturing plans.

Last year, Honda sold approximately 1.4 million vehicles in the U.S., including its Acura lineup. The Civic remains one of its best-selling models, with over 240,000 units sold in 2023, second only to the CR-V. Sales of the Civic, known for its affordability, surged 21% year-over-year, according to company data. Notably, around 40% of Honda’s U.S. sales come from vehicles imported from Mexico and Canada.

If Mexico or Canada retaliate with their own tariffs, Honda could face further cost challenges. The company currently exports around 60,000 U.S.-made vehicles to those countries, making it vulnerable to policy changes that increase trade barriers.

Meanwhile, former President Donald Trump announced a massive $100 billion investment from Taiwanese semiconductor giant TSMC into the U.S. during a White House event. This new funding builds on the company’s previous $65 billion investment and will go toward building five advanced chip fabrication facilities. “Much of this investment will be in Arizona,” Trump said, emphasizing that the project will create “many thousands” of high-paying jobs.

Just hours later, Trump formally declared that new tariffs on Mexico and Canada would take effect. Speaking from the White House alongside Commerce Secretary Howard Lutnick, he confirmed that 25% tariffs would be imposed on America’s largest trading partners, starting Tuesday.

“Tomorrow, tariffs—25% on Canada and 25% on Mexico,” Trump said. “And that’ll start. … What they have to do is build their car plants, frankly, and other things in the United States, in which case they have no tariffs.”

The tariff announcement comes amid ongoing political battles in Washington. Trump, set to address Congress on Tuesday night, is expected to outline his vision for the next four years. A government shutdown looms on March 14 unless lawmakers can agree on a budget. Republicans remain divided over spending levels, while Democrats demand assurances that funds will be allocated as intended. Some Democratic lawmakers are even bringing recently fired federal workers as guests to the speech, highlighting concerns over Trump’s approach to federal employment policies.

As political and economic uncertainty grows, companies like Honda are being forced to make tough decisions, navigating shifting trade policies and economic pressures that will shape the future of manufacturing in North America.