Honda is reconsidering plans for an eighth assembly plant in North America, with uncertainty over the future of the United States-Mexico-Canada Agreement (USMCA) threatening to influence the Japanese automaker’s next major investment.

Honda Executive Vice President Noriya Kaihara said the company is approaching full production capacity in North America and needs another factory. However, he warned that the investment could be reconsidered if the USMCA is not extended.

“If there is no USMCA agreement in the future, we may have to change our direction,” Kaihara told reporters in Washington. Honda expects to make a decision within the next one or two years, with the potential plant targeted to begin production around 2030.

The uncertainty comes as trade tensions between the U.S. and Canada intensify, with new tariffs and retaliatory measures adding further pressure on manufacturers.

Honda is currently absorbing tariff costs rather than passing them on to customers. At the same time, the company is benefiting from strong demand for hybrids and fuel-efficient vehicles, recording its best July sales performance in seven years, with sales rising 36 per cent.

Honda has also dramatically scaled back its EV ambitions. It has abandoned its previous target for EVs to account for 20 per cent of sales by 2030 and instead plans to launch 15 new hybrid models by 2030.

The company has also indefinitely suspended its US$11 billion Canadian EV and battery project and cancelled three planned U.S. EVs.

For Honda, the message is clear: North America remains strategically important, but long-term investment depends increasingly on trade certainty.