Ottawa has offered duty relief to automakers provided they keep their production in Canada. The country fears that US President Donald Trump's policies could trigger a flight of the key manufacturing sector to the US, AFP reports.

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 build cars in Canada would be allowed to import duty-free a certain number of US-made cars and trucks, the government said.

Canada imposed a 25 per cent tariff on vehicle imports from the United States in response to President Donald Trump's levies on cars and parts imported from Canada.

The Canadian duties apply to cars and light trucks that do not comply with the existing North American Free Trade Pact. Similarly, U.S. automotive duties provide some grace period for compliance with the requirements of the pact.

The duty exemption is contingent on "automakers continuing to manufacture vehicles in Canada and completing planned investments."

During a campaign stop in the province of Quebec, Prime Minister Mark Carney accused Trump of "attacking our auto industry" and seeking to "tear apart the most integrated industrial manufacturing sector in the world."

"This is one of the jewels in the crown of North American manufacturing," he said, vowing to fight for jobs in a sector that is already starting to see layoffs and shift reductions.

Earlier, the Nikkei newspaper reported that Honda was considering moving some of its vehicle production from Canada and Mexico to the U.S. to avoid U.S. tariffs.

The Japanese automaker has denied having such a plan.

"We can confirm that our Canadian manufacturing facility in Alliston, Ontario, will be operating at full capacity for the foreseeable future and no changes are being considered at this time," Honda said.