Ottawa on Tuesday offered tariff relief to automakers on condition they maintain production in Canada, fearing US President Donald Trump's policies could trigger a flight of the key manufacturing sector to the United States.
The announcement coincided with a report in a Japanese newspaper that Honda was considering moving assembly lines from Canada to its southern neighbor, which the company denied.
Under Ottawa's plan, companies that continue to manufacture vehicles in Canada would be allowed to import a certain number of cars and trucks made in the United States tariff-free, the government said.
Canada has imposed a 25 percent tariff on vehicle imports from the United States, in retaliation against President Donald Trump's levies on autos and parts imported from Canada.
The Canadian tariffs applied to cars and light trucks that are not compliant with an existing North American free trade pact. Likewise, US auto tariffs provide some reprieve for compliance under the pact.
The tariff relief, Ottawa said in a statement, was contingent "on automakers continuing to produce vehicles in Canada and on completing planned investments."
At an election campaign stop in Quebec province, Prime Minister Mark Carney accused Trump of "attacking our auto industry" and seeking to "pull apart the most integrated industrial manufacturing sector in the world."
"This is one of the crown jewels of North American manufacturing," he said, vowing to fight for jobs in a sector that is already starting to see layoffs and reduced shifts.
Earlier, the Nikkei newspaper reported that Honda was considering moving some of its car production from Canada and Mexico to the United States to avoid the US tariffs.
The Japanese automaker denied any such plan.
"We can confirm that our Canadian manufacturing facility in Alliston, Ontario, will operate at full capacity for the foreseeable future and no changes are being considered at this time," it said in a statement.
