Japanese auto giant Honda said Thursday that its plans to build a multi-billion-dollar electric vehicle plant in Canada have been “indefinitely suspended,” marking another blow to the country’s tariff-hit auto sector.

Canada had hoped to become a global EV manufacturing powerhouse by striking massive government-backed deals with leading automakers like Honda and Germany’s Volkswagen — but those ambitions are fading.

Demand for EVs has proven softer than expected in some markets, and sales have been hurt by US President Donald Trump’s decision to cancel federal government tax breaks for electric vehicle sales.

Honda said in a statement that its decision was “driven by developments in business conditions, changes in outsourcing strategies and changes in customer demand.”

The company planned to expand its operations in Elliston, Ontario, about 90 kilometers north of Toronto, where it has been manufacturing traditional vehicles for decades.

When the plan was announced two years ago, Canadian officials valued the project at about C$15 billion ($11 billion).

Canada has presented itself as an ideal location for EV battery production, arguing that it has vast reserves of critical minerals needed for advanced battery technology and an abundance of skilled auto workers.

But multiple projects have been delayed or shelved as automakers adjust their plans to ramp up EV production.

Honda announced in March that it was canceling the launch and development of certain EV models in the United States, blaming a “change in government policy” by the Trump administration.

Canada’s auto industry has also been hit uniquely hard by Trump’s tariffs, given the deep integration of the North American auto sector.