Toyota increases its American spending plan by 30% amid potential tariffs

Despite President Donald Trump’s potential raise on car and auto part tariffs, Toyota has invested an additional USD $3 billion to a multi-year plan announced just before the ‘America first’ President took office. This brings Toyota’s total investment to almost USD $13 billion over a five-year period ending in 2021 and includes a new USD $750 million outlay across several plants, the most noteworthy being for retooling a factory in Kentucky to build gas-electric versions of the top-selling RAV4 crossover and Lexus ES sedan.

Japan’s largest automaker has tried to work its way into President Trump’s good graces after being a target of his tweets when he was still President-elect in January 2017. Days after drawing criticism for plans to build Corolla cars in Mexico, Toyota announced a USD $10 billion, five-year investment plan for the US. In August of that year, it unveiled plans with Mazda to jointly build a USD $1.6 billion factory in Alabama.

Last year, President Trump asked the Commerce Department last year to investigate whether imported cars and parts pose a national security threat and has been debating a potential increase in tariffs to as much as 25 percent. Toyota and other automakers have warned this would harm the economy by jacking up car prices and undercutting sales. A little over an hour after the company’s announcement, President Trump congratulated Toyota in a tweet and referenced the investment to the U.S.-Mexico-Canada Agreement (USMCA) the still un-ratified deal intended to replace the North America Free Trade Agreement (NAFTA).

The only hybrids Toyota makes now in the U.S. are gas-electric versions of its Camry and Avalon sedans and the Highlander sport utility vehicle. Building the RAV4 hybrid in Kentucky reduces trade risk for a key model that’s been entirely imported from Canada and Japan. Toyota’s announcement follows that of General Motors, which said it would shut the first of four plants it is closing in the country over the next year as it aims to replace slow-selling sedans. Ford is also eliminating thousands of jobs in the midst of its USD $11 billion restructuring.

Additionally. the downturn in China's auto market worsened in January and February amid an economic slowdown and a tariff standoff between the two countries. Though economists and industrial analysts often combine the first two months of the year when looking at consumer activity, to screen out the effect of the Lunar New Year holiday, when factories close for up to two weeks and commercial activity falls.