Toyota the first foreign carmaker to face Trump's wrath

A pedestrian walking past a Toyota car dealership in Mexico City on Jan 6, 2017. US President-elect Donald Trump has threatened to impose punitive tariffs on the automotive manufacturer's cars built in Mexico.
A pedestrian walking past a Toyota car dealership in Mexico City on Jan 6, 2017. US President-elect Donald Trump has threatened to impose punitive tariffs on the automotive manufacturer's cars built in Mexico.PHOTO: BLOOMBERG

TOKYO • US President-elect Donald Trump has threatened to impose punitive tariffs on Toyota Motor's cars built in Mexico, prompting the Japanese government to defend the carmaker as an "important corporate citizen" of the United States.

The attack is the first against a foreign carmaker by Mr Trump, who has repeatedly hit out at US companies for using lower-cost factories abroad at the expense of jobs at home. He has slammed US carmakers, including Ford, which this week scrapped a planned US$1.6 billion (S$2.3 billion) Mexico plant.

"Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for US. No way! Build plant in US or pay big border tax," Mr Trump threatened in a tweet.

Yesterday, Toyota shares fell more than 3 per cent before recovering, and Honda Motor and Nissan Motor slid around 2 per cent - even as the government and analysts sought to brush off the impact of the attack.

Chief Cabinet Secretary Yoshihide Suga told reporters yesterday that Toyota was an "important corporate citizen", while Trade Minister Hiroshige Seko stressed the contribution of Japanese companies to US employment.

"We think the impact on business performance is limited," Mr Akira Kishimoto, a senior analyst at JP Morgan, said in a note. "A cool judgment is needed."

Toyota's exposure to Mexico is limited, Mr Kishimoto said, adding that even an "extreme case" tariff of 20 per cent would hit its operating profit by around 6 per cent. Mr Trump has threatened a 35 per cent tariff on cars from Mexico.

Toyota is just one of a host of companies operating in Mexico. It has an assembly plant in Baja, California, where it produces the Tacoma pickup truck, and where it could increase production.

Mr Trump's tweet, however, confused Toyota's existing Baja plant with the planned US$1 billion plant in Guanajuato, where construction got under way last November, days after the US election.

The Guanajuato plant will build Corollas and have an annual capacity of 200,000 when it goes online in 2019, shifting production of the small car from Canada.

Baja produces around 100,000 pickup trucks and truck beds annually. Toyota said last September that it would increase output of pickup trucks by more than 60,000 units annually. Other Japanese carmakers in Mexico include Nissan and Honda.

REUTERS

A version of this article appeared in the print edition of The Straits Times on January 07, 2017, with the headline 'Toyota the first foreign carmaker to face Trump's wrath'. Print Edition | Subscribe