Heat 2 tablespoons light olive oil in a medium saucepan over medium heat. Add 1/2 chopped red onion and season lightly with salt. Cook for 2–3 minutes, then add 3 minced garlic cloves and sauté until the onion is soft, translucent, and fragrant, but not browned.
Add the 8-ounce can of tomato sauce, 1/2 cup water, 1/4 cup honey, 2 tablespoons apple cider vinegar, 1 tablespoon balsamic vinegar, 1 tablespoon molasses, 1 teaspoon liquid smoke, 1 teaspoon paprika, 1 teaspoon salt, and 1/8 teaspoon black pepper. Stir well to combine.
Bring the sauce to a gentle simmer, then reduce the heat to low. Simmer uncovered for about 20 minutes, stirring occasionally, until the sauce thickens and coats the back of a spoon while still pouring easily. Keep the heat low to prevent the honey from scorching.
For a smooth sauce, use an immersion blender directly in the saucepan, or carefully transfer the sauce to a blender. Let it cool slightly before blending to avoid splashing.
Let the sauce cool to room temperature, then transfer it to a clean jar or airtight container before using or storing.