Negotiations between Nissan and Honda are reportedly shaky after the two Japanese automakers previously announced they would merge by 2026.

Nissan's board has decided that Honda’s terms for a merger are unacceptable, according to the Wall Street Journal. Honda reportedly proposed making Nissan one of its subsidiaries rather than the following through with the initial more equal structure.

The talks between the two have become complicated by "growing differences" making the state of the merger uncertain, Reuters reported.

Neither of the two companies have yet to make an official announcement on the state of the conversations.

A Honda spokesperson told USA TODAY that discussions between the two companies are ongoing and that additional details will be shared at the appropriate time.

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"The two companies planned to decide on the direction of the management integration by the end of January, but Integration Preparatory Committee discussions are ongoing. We aim to finalize our direction by mid-February and will announce it at that time," Nissan said in a statement.

Merger would make pair world's third-largest auto group

A merger between the two companies would make the newly integrated Nissan and Honda the third-largest auto group in the world, Reuters reported.

The two previously said a decision would be shared by the end of January but pushed the announcement back to mid-February. Last year, the carmakers signed a memorandum of understanding allowing room for integration discussions to play out through a joint holding company.

A potential merger would allow the companies to compete with Chinese manufacturers in an era of electric vehicles and self-driving vehicles, according to Jessica Caldwell, head of insights for auto research and news company Edmunds.

“A merger would be a long-term strategy, not a solution to any short-term challenges either company is facing," Caldwell previously told USA TODAY. "Both Nissan and Honda are positioning themselves for the future, which will be defined by electrification and autonomous technology – developments that are extremely costly."

Merger talks come amid Trump tariff's

The reported disruption of merger talks comes after President Donald Trump announced tariffs of up to 25% on goods from Mexico and Canada and a 10% tariff on goods from China. 

"Investors may get concerned about Nissan's future (and) turnaround," Morningstar analyst Vincent Sun told Reuters. "Nissan also has a larger risk exposure to U.S.-Mexico tariffs than Honda and Toyota."

Sun also told the Wall Street Journal that Nissan should also be concerned about a lack of compelling electric vehicle offerings and strong reliance on Mexico.

In 2024, Nissan produced more of its vehicles in Mexico than in any other country, surpassing both China and Japan. Honda also creates cars in Mexico before exporting them to the U.S, the Journal reported.

Contributing: Julia Gomez and Mike Snider, USA TODAY