Sending a clear signal to the world that all his election promises might not be campaign rhetoric after all, U.S. President-elect Donald Trump has threatened Toyota Motor Corp that he will impose a hefty tax if the world’s largest automaker builds its Corolla cars for the U.S. market at a plant in Mexico.
“Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax,” Trump said in a post on Twitter.
Toyota, which is building a $1 billion plant in Guanajuato, where construction got under way in November, said it would not take away employment in U.S. The Guanajuato plant will build Corollas and have an annual capacity of 200,000 when it comes online in 2019, shifting production of the small car from Canada.
“Toyota looks forward to collaborating with the Trump administration to serve in the best interests of consumers and the automotive industry,” Toyota spokesman Scott Vazin said.
Trump’s latest threat could further jeopardize world trade relations and aggravate the worsening global strategic rivalry.
The president-elect’s attacks on investments by companies in Mexico have cast a shadow over cross-border production networks central to more than $583 billion a year in trade between the two countries.
The value of the Mexican peso has skidded amid fears that Trump’s policies would harm Latin America’s second-biggest economy — and declined after Trump’s tweet.
The Japanese government defended Toyota Motor Corp on Friday as an “important corporate citizen” of the United States, after President-elect Donald Trump singled out the automaker and threatened to slap punitive tariffs.
Chief Cabinet Secretary Yoshihide Suga told reporters that Toyota was an “important corporate citizen,” while Trade Minister Hiroshige Seko stressed the contribution of Japanese companies to U.S. employment.
Toyota President Akio Toyoda said in Japan on Thursday that the automaker has no immediate plans to curb production in Mexico, preferring to wait until after Trump’s Jan. 20 inauguration before deciding whether to make any changes.
Between 1994 and 2013, U.S. auto factory jobs dropped by a third while jobs in Mexico rose almost five-fold over the same period as lower-wage production boomed.
Mexico now accounts for 20 percent of all vehicle production in North America and has attracted more than $24 billion in auto investment since 2010, according to the Ann Arbor, Michigan-based, Center for Automotive Research.
But it is Nissan, Japan’s second-largest automaker, which would be the bigger victim of any tax punishment. Nissan built its first overseas plant in Mexico in 50 years ago and now produces more than 800,000 cars there, mainly its entry-level Versa and Sentra sedans.
Nissan’s production dwarfs that of Toyota, Honda Motor Co and Mazda Motor Corp in Mexico. It exports roughly half of its output to the United States, where it also has production plants.
Japanese automakers together produced around 1.4 million vehicles in Mexico in the year ended March, nearly 40 percent of the country’s total output. According to the Japan External Trade Organization, they plan to ramp up production to 1.9 million by 2019.
Trump has said he plans to renegotiate the North American Free Trade Agreement between the United States, Canada and Mexico, and has vowed to impose a 35 percent tariff on cars exported to the United States from Mexico.
According to JP Morgan estimates, an increase in tariffs on cars exported from Mexico to the United States to even 10 percent would hit Nissan’s consolidated operating earnings by 10.3 percent, more than 5.5 percent at Mazda. Toyota would see a hit of 0.7 percent, while Honda 2.2 percent.