Honda Motor (HMC) is preparing to relocate vehicle production from Mexico and Canada to the US in response to a new 25% tariff on all imported automobiles imposed by the Trump administration, Nikkei reported Tuesday.

The Japanese automaker plans to boost US vehicle production by up to 30% over the next two to three years, enabling it to manufacture about 90% of its US sales volume domestically, according to Nikkei.

The report said the shift is expected to affect the production of key models like the CR-V and Civic, currently assembled in Canada, and the HR-V, which is made in Mexico but not yet produced in the US, adding building the HR-V stateside will require new investments.

Despite the US-Mexico-Canada Agreement allowing for tariff-free trade when origin rules are met, vehicles compliant with USMCA are still subject to the new 25% levy, Nikkei said, adding while higher US content can reduce the tariff burden, it won't eliminate the cost, which could reach an estimated $4.57 billion annually for Honda.

To accommodate increased US production, Honda is considering adding a third work shift, expanding weekend output, and hiring more workers, according to the report.

It added the transition is expected to take at least two years, given the need to adjust supply chains and production capacity gradually.

The report said Honda currently sells 1.42 million vehicles annually in the US, with about 1 million already built locally.

Honda Motor did not immediately respond to MT Newswires' request for comment.

(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)