March 4 - By Nick Carey, European Autos Correspondent

Greetings from London!

The trade war U.S. President Donald Trump has threatened since last year’s election campaign is finally upon us, with border taxes of 25% on imports from Canada and Mexico in effect as of today, with an additional 10% on imports from China for apparently failing to stem the flow of fentanyl.

China and Canada announced retaliatory measures almost immediately. Shares in European automakers and suppliers fell sharply – with Volkswagen and Stellantis particularly vulnerable to tariffs on Mexico.

Perhaps the only silver lining in all this is that after six plus weeks of uncertainty and on-and-off-again tariff threats, the auto industry now has some certainty on import duties. For how long, is anyone’s guess.

But border taxes are invariably passed on to consumers.

And U.S. consumers were vocally unhappy about inflation during last year’s election, so their reaction to tariffs could be a critical factor in how long they remain in place.

Which brings us to today’s Auto File…

• Honda’s U.S. Civic choice

• EU swerves on CO2 fines

• GM’s EV test

Honda chooses Civic in Indiana over Mexico

One of the biggest questions for automakers ever since Trump’s election was whether the threat of tariffs would force them to move more production to the United States from Mexico.

In Honda’s case, the answer appears to be ‘yes.’ As my Reuters colleague Maki Shiraki reports here, Honda has decided to produce its next-generation Civic hybrid in the U.S. state of Indiana, instead of Mexico, to avoid tariffs on one of its top-selling car models.

Honda's move is the first such concrete measure by a major Japanese car company.

According to sources familiar with Honda’s plans, the automaker had planned to manufacture the next-generation Civic in Guanajuato, Mexico – with one source saying Mexico was chosen because rising costs made producing it in Indiana and Canada a tough choice.

But thanks to tariff threats, Honda will instead build the new Civic model in Indiana from May 2028.

Honda sends around 80% of its Mexican output to the United States and the company warned in November that the automaker would have to think about shifting production if Trump imposed permanent tariffs on imported vehicles.

Recommended reading:

• Morgan: Trump threats to hurt orders

• Western brands’ Russia conundrum

• U.S. union: review Tesla’s valuation

EU blinks on CO2 targets for cars

Less than four years after the European Union boldly proclaimed that it would effectively ban fossil-fuel car sales from 2035, the bloc balked at the first major hurdle on that journey – 2025 CO2 emission targets.

After Europe’s auto industry lobbied vigorously against those targets and claimed it would cost them 15 billion euros in fines, the EU backed down by giving automakers three years, rather than only one, to meet new CO2 emission targets for their cars and vans.

This, said European Commission President Ursula von der Leyen, would give the industry ‘breathing space’ to meet the targets. The Commission will also propose to member states ways to speed up electrification, including through incentives for corporate fleets.

Now, you can debate whether it made sense for the EU to ban combustion engine cars as soon as 2035. You could also argue that EU members have undermined electrification by slashing EV subsidies and not investing enough in charging infrastructure.

But moving the goalposts you set on a key target sends a clear signal to the market that your heart is not really in it.

It also raises a valid question for those investing in anything to do with EVs: What will the EU say in 2027 when Europe’s auto industry comes back cap in hand asking for more leniency?

GM’s EV Rubicon

After past failed attempts to electrify that cost billions of dollars, General Motors faces a pivotal moment in its bid to boost EV sales.

As my Reuters colleague Kalea Hall reports here, last year the No.1 U.S. automaker seized EV market share from the likes of Tesla despite slowing demand as its customers increasingly chose EVs over comparable GM  gas-powered models.

The company is rapidly expanding its EV lineup despite heavy losses and a trend among rivals including Ford and Toyota to prioritize gas-electric hybrids.

Experts say political and EV market headwinds will make 2025 an acid test for whether GM can sustain its momentum and hit a tipping point in its long and expensive history of electrification efforts – including whether the U.S. government kills a $7,500 EV purchase incentive.

One pivotal moment will come later this year as GM launches the next-generation Bolt, expected to be its most affordable EV at about $30,000.

But the biggest obstacle to GM's all-electric ambitions could be its own lucrative business making full-sized pickups and SUVs, which has so far clashed with the challenges of making electric versions that are affordable and capable enough to sell in large volumes.

Nissan’s crisis continues

Fresh from the disastrous failure of merger talks with Honda, Nissan  will unveil an executive shake-up this month, though embattled CEO Makoto Uchida is currently expected to hang on to his job.

Sources told my Reuters colleagues Maki Shiraki, Daniel Leussink and Norihiko Shirouzu that the automaker will announce its management reshuffle on March 12. You can read about it here.

This is part of a turnaround plan Nissan pledged to accelerate this month after two straight quarters of dismal performance that has plunged the automaker deeper into crisis.

Fast Laps

China’s BYD raised $5.59 billion in a primary share sale that was increased in size, making it the largest of its kind in Hong Kong in four years.

Tesla has applied for a permit typically associated with chauffeur-operated services, according to California regulators, marking the first in a series of regulatory approvals required to eventually launch a robotaxi service.

General Motors said it had hired its first chief artificial intelligence officer as the automaker looks to use the technology more in its vehicles and in other parts of its business.

Polestar secured loans of up to $450 million and will delay fourth-quarter results to April as the Swedish EV maker burns through cash.

Mercedes-Benz has won agreement from its works council to offer buy-outs to staff and reduce planned salary increases by half, as part of a wider cost-cutting drive as it battles to revive profits.

Italy's Agnelli family cut its controlling stake in Ferrari  by around 4% and raised around 3 billion euros for acquisitions.

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(Editing by Alexandra Hudson)