Perhaps our new trade deal isn't as good as we'd hoped.
Over the past year, trade tensions between the US and Mexico have been on edge after President Donald Trump threatened to hit Mexican-built cars with a border tax. After long negotiations, the US and Mexico reached a new deal, which replaces the North American Free Trade Agreement (NAFTA).
As part of the new deal, all Mexican-built vehicles with more than 75% parts content from the US or Mexico will avoid any sort of tax. Mexico's economy minister confirmed that this deal should protect over 70% of Mexican-built vehicles. But what about the other 30%?
According to a Reuters report, Honda is currently thinking about moving US-bound Fit production away from its plant in Celaya, Mexico back to Japan. The Celaya plant also produces the Honda HR-V for the US market, though only the Fit was mentioned by those in the know.
Sources close to the issue also say Honda is considering the move due to the new trade agreement. This is likely because the Fit is built using less US and Mexican parts content than the new trade agreement allows, meaning it will be hit by a tariff. Since the Fit is an inexpensive car to begin with, any sort of price hike could have an adverse effect on profits.
A Honda spokesperson said the company is not ready to make a decision on Fit production, but rumors indicate a move could happen within the next few years. The Fit just received a refresh for 2019 and the company is currently working on a new model that is due in 2020. Perhaps, when the new Fit arrives, it will be built in Japan instead of Mexico.