By on November 12, 2017

2017 Toyota Tacoma TRD Pro – Image: Toyota

Despite President Trump giving Toyota significant praise for its continued investment in the United States last week, the success of the automaker’s production plans hinge on the continuation of NAFTA — something the Commander in Chief has been vehemently opposed to since his well-before his inauguration.

Toyota and Mazda’s $1.6 billion factory is anticipated to yield 150,000 Corollas annually and free-up assembly facilities in Mexico that would build the Tacoma pickup. However, if the North American Free Trade Agreement is dissolved, anything produced south-of-the-boarder could be subjected to the chicken tax. Were that to happen, Toyota would be placed into quite a predicament and faced with high import taxes on any trucks it had hoped to ship to the U.S.

Toyota is currently expanding Tacoma production in Tijuana, Mexico. By 2019, the automaker’s pickup manufacturing in Mexico will have risen to around 260,000 units per year — representing an almost billion-dollar investment between two plants. If NAFTA dissolves, every single one of those vehicles shipped north could be hit with a 25-percent import fee.

“That is a risky strategy,” Duncan Wood, Director of the Washington-based Mexico Institute, told Automotive News. “I think there is a very real probability that the NAFTA talks will fail … There’s a great deal of pessimism at the moment here in Washington.”

Toyota North America’s CEO, Jim Lentz, is less concerned — suggesting that the chicken tax would be so detrimental to North American production efforts that the U.S. would probably go forward with implementing it in Mexico. But other companies aren’t so confident. Fiat Chrysler Automobiles said it would definitely move Ram production from Mexico to Michigan if NAFTA is done away with.

“Properly motivated, it could be executed very quickly by FCA,” CEO Sergio Marchionne told analysts during a conference call from earlier this year.

Meanwhile, Lentz feels confident it won’t ever come to that. “Hopefully, that is not going to even be considered,” he said. “The risk is that if things got that difficult, then manufacturing leaves North America because an automaker might say that ‘as long as I’m going to pay a chicken tax, I might as well make these in Thailand or somewhere else. I might as well make them in China.'”

“There aren’t many times in the auto industry that importers, domestic nameplates, that everyone agrees. We have to really understand the unintended consequences of tinkering too much with NAFTA,” he explained.

[Image: Toyota]

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51 Comments on “Toyota’s Truck Production Plans Largely Dependent on NAFTA Existing...”


  • avatar
    Fred

    What little I know about business is they don’t changes. Removing NAFTA would be a disruptive change that will only cost us money.

    • 0 avatar
      I_like_stuff

      Us? Do you live in Mexico or Canada? Are you a major shareholder in an auto company? Then you are correct. Otherwise, you are incorrect. NAFTA has been bleeding the US dry since it was implemented. It needs to be ended.

      I think you are correct though that it won’t be ended because of the corrupt nature of DC. The Swamp lives on at the expense of the people.

      • 0 avatar
        Fred

        If your car or truck is made in Mexico, or Canada for that matter, and NAFTA is removed, then your car will cost more money. If the factory is moved then the manufacture will pass those costs on to you. Especially if you like unpopular models do you honestly think they will make those cars here in America? You really need to think beyond the rhetoric.

        • 0 avatar
          I_like_stuff

          Same arguments from the open border crowd. If illegals go home tomatoes will cost $100 a pound.

          If Nafta goes away aN accord will cost a gazillion dollars.

          Spare me.

          This deal has ccost 1M American jobs and counting. It needs to end.

          • 0 avatar
            Proud2BUnion

            The Accord has been built in Ohio since 1982, so ending NAFTA would most likely not raise the cost anywhere near ” A gazillion dollars”.

        • 0 avatar
          DenverMike

          Wow that was huge price slashing when the Tacoma left San Antonio for TJ! Thank god!

          Or no?? What about when the Silverado/Sierra left USA union assembly and went to Mexico? Big price drop or no?

          Crap doesn’t flow the other way either. The market sets the “price”, including rebates, regardless of anything else.

          I agree killing NAFTA will likely “cost us money”, but in indirect ways. The automotive sector is just a small part of NAFTA trade, and when corporations lose (or we lose the corporations) don’t we all lose? It just seems the “winners” would be just a narrow few.

          But most corporations are very limited on the loses they can simply *charge more* for.

      • 0 avatar
        LectroByte

        NAFTA has been a boon for corn farming in the midwest. Don’t worry, we’ll probably find a way to blame it on Hillary as corn prices collapse when we pull out of NAFTA, so it’s all good!

        • 0 avatar
          I_like_stuff

          lol. So expensive cars is a bad thing but expensive corn is a good thing? Id love to see corn pruces fall. Why do you want artificially high prices for corn which in turn increases the price of all sorts of food products?

          You are arguing against your own point.

        • 0 avatar
          carguy67

          The ‘boon for corn farming in the midwest’ has put thousands of small Mexican farmers out of business. I think most of them have moved into my neighborhood.

          http://www.mtholyoke.edu/~mindi22l/classweb/wp/crisis.html

        • 0 avatar
          Art Vandelay

          Really…Corn!? It is one of the most subsidized crops in the world? Killing the subsidies that ensure my fuel tank has a bunch of ethanol in it at any given time would tank corn prices as well as any other number of handouts to the corn industry that don’t involve NAFTA.

  • avatar
    I_like_stuff

    It’s always telling when people in the media are concerned about everything BUT American workers. The first and only concern is how will this affect Mexicans and Japanese.

    #ThisIsWhyYouGotTrump

    • 0 avatar
      Luke42

      We got Trump because a little under half of the American population are gullible fools who couldn’t spot a clueless charlatan if he spent months screaming incoherent büllshít at you on TV.

      There is no excuse for anyone who voted to shoot ourselves in the foot like this.

      And, yes, most of us saw this coming — but we just didn’t happen to live in the right places to prevent this catastrophe.

    • 0 avatar
      Guitar man

      The Mexican peso has devalued 40% this year and workers make what $3 an hour ? A 25% tariff won’t make a lick of difference, local cars will just increase prices by 25%.

      They had tariffs of 150% plus a 100% import duty on cars in Australia in the 1970s. The cheapest cars were fully imported from Japan.

  • avatar
    I_like_stuff

    Here is that rabid right wing Trump mouthpiece – HuffPo – on the benefits of NAFTA

    https://www.huffingtonpost.com/lori-wallach/nafta-at-20-one-million-u_b_4550207.html

    NAFTA at 20: One Million U.S. Jobs Lost, Higher Income Inequality

    “Such outcomes include a staggering $181 billion U.S. trade deficit with NAFTA partners Mexico and Canada and the related loss of 1 million net U.S. jobs under NAFTA, growing income inequality, displacement of more than one million Mexican campesino farmers and a doubling of desperate immigration from Mexico, and more than $360 million paid to corporations after “investor-state” tribunal attacks on, and rollbacks of, domestic public interest policies.”

    1M American jobs lost, pfffft. Probably just deplorables in Michigan and Ohio. Stop whining you losers and go get a job designing a cool new app in San Jose. Oh wait never mind, those jobs only go to H1Bs.

    Immigration and Free Trade Forever!!!!

    • 0 avatar
      ect

      The author of the article you cite is employed by Public Citizen, a left-wing group that opposes free trade. She is not unbiased, and her data claims are completely unsubstantiated.

      What we do know from real data (Bureau of Labor Standards) is that, since NAFTA was signed, US manufacturing output (in constant dollars) has doubled, while the number of direct manufacturing jobs has fallen by about a third. These job losses are almost entirely due to technology, not trade deals.

      The empirical data tells us that NAFTA has both created and killed jobs in all 3 countries. In the US, the net effect on total employment has been quite small (jobs created and lost tend to even each other out), but the jobs created tend to be higher-skilled and higher-paying than the jobs lost.

      Most of the data suggests that NAFTA has added about 1% to total US GDP – not a huge amount, but a positive nonetheless.

      “bleeding the US dry”?. Not at all true.

  • avatar
    Eddy Currents

    “south-of-the-boarder”

    Skate boarder, surf boarder or a house guest that has overstayed their welcome?

  • avatar
    Add Lightness

    I would like to see NAFTA dissolve and a big import tax on vehicles entering America so Canada can place a big export tax on crude oil entering America.
    Time to wean America off oil.

    • 0 avatar
      Luke42

      If you substitute jets and lumber for cars and oil, you already have your wish!

      Mr. Art Of The Deal has managed to start a trade war with Canada. Canada! Seriously, Canada…

      SMH.

      I’m all for getting off oil, but I’d rather do it by replacing the income tax with a carbon tax.
      Income good => don’t tax it.
      Carbon bad => do tax it.

      • 0 avatar
        TMA1

        Trump doesn’t have anything to do with the trade remedy cases against Canada. And the lumber dispute started under Obama. The current one, at least. It’s been going back and forth since Reagan was still new in office.

        • 0 avatar
          ect

          These trade disputes are based on complaints to the Department of Commerce, which is very much part of the Administration. Perhaps not coincidentally, Commerce has a perfect record in evaluating these complaints – it has always found in favour of the US complainants, never rejected a single claim.

  • avatar
    CKNSLS Sierra SLT

    NAFTA hasn’t saved anybody money based on the cost of vehicles currently.

    Maybe if the vehicles made in Mexico were made here they could set realistic MSRPs and do away with $10,000.00 to $12,000.00 discounts on trucks-depending on the time of year.

    • 0 avatar
      el scotto

      10-12K discounts on trucks occur on those special occasions called “day of the week”. If the dealer is open, you automatically get 10-12k off a new truck!!! I have no idea why this happens but I have a sneaking feeling that the dealership sales manager is a huge; I repeat HUGE, fan o this. After all, the sales manager can teach Billy how to cube the ole four-square.

  • avatar

    In a world where the top 1% have more wealth than the bottom 90%, white people are the only racists, popular music is an autotuned fashion show, the USPS subsidizes shipping from China, and I can’t even find a single goddamn avocado around here that isn’t rotten inside, why should I let some smelly Canadians build my car for me? They have their free health care, french fries and gravy, and fancy metric system. They don’t need my money. Mexico is pretty sad, though. We should build a wall around them to keep them warm.

  • avatar
    manu06

    I’d gladly pay market price for a vehicle made in the USA versus one made in another country.
    Putting consumerism and corporate profits over the long term health of the US economy is a
    mistake. Drive through the Rust Bell, see the economic decline and the ongoing social diasaster
    which, by the way, has a monetary cost to the taxpayer and tell me the US is better off.

    • 0 avatar
      sooperedd

      ^^THIS
      Outsourcing/off-shoring of jobs and financial deregulation have WRECKED this country.

      • 0 avatar
        Art Vandelay

        “Outsourcing/off-shoring of jobs and financial deregulation have WRECKED this country.”

        Even if you make the whole “Free Market at Work” arguement and the consumer is better off, it has certainly been a huge driver of the dreaded income divide in this country. They used to say of Reaganomics that “The Rich got Richer and the Poor got Poorer.” How can the same not be said here?

    • 0 avatar
      el scotto

      Part of the economic disaster in the rust belt was the ignorance/arrogance of the Big 3 automakers and the UAW. They all thought the GM would always have a 60% market share. The Japanese changed all that. Another part is Wal-Mart; manufactures were forced to produced products at a lower and lower price to be acceptable to Wally World. Can’t meet Wal-Mart’s price on an American made product? Off-shore it to meet Wal-Mart’s price. In these sad economic times, our favorite American beers (swills) Bud, Miller, and Coors are owned by foreign entities.

      • 0 avatar
        Art Vandelay

        “In these sad economic times, our favorite American beers (swills) Bud, Miller, and Coors are owned by foreign entities.”

        Those beers all suck. When companies like Boston Brewing Company and even the smaller regional brews began to be able to distribute their products nationwide and the craft beer industry took off they got hurt because, well, they suck.

        I’m not a big hipster fan, and frankly some of their beloved craft beer sucks too and has way too many stupid flavors, but they really have helped make American Beer decent. That and they saved vinyl so they are at least OK in my book.

    • 0 avatar
      Big Al from Oz

      manu06,
      There is one thing some of you “Buy American Only” people forget. That is, you need to trade with others. If you push the Buy American Only line, no one will buy US manufactured goods.

      The US economy will falter under your scenario. The US needs to trade and as is becoming apparent, it will not be on the US’es terms as much as it used to be. The world is much more competitive than 40-60 years ago.

      Trade isn’t golf were you are given a handicap.

      • 0 avatar
        threeer

        I’d agree with you if it weren’t for the fact that other countries have been given rather large handicaps. Yes, we need to trade. Equally. Kind of hard to do when other countries slap tariffs on our goods, require lopsided JV’s to do business and demand the handover of our technical know-how (or just outright steal it). But it’s all good as long as the U.S. consumer gets the cheapest price in the store, regardless of the cost to the economy as a whole.

        • 0 avatar
          Big Al from Oz

          threeer,
          In the auto industry there is very little handicap given to them. There is actually added cost when dealing with the peculiar US vehicle market via, differing regulations, tax, ie, pickup trucks face a 25% import tax.

          The reality is the US is not as competitive in vehicle manufacturing. It is only competitive in large low quality SUVs and pickups. Not one other country builds large low quality SUVs and pickups. This is where the US is competitive, by default through the barriers and the 25% import tariff.

          Small vehicles, I’d even say future EVs will not become a major export item for the US.

          Also, all these so called manufacturing jobs that have off shored have been largely taken by robotics and AI. This will increase, and the US is not entitled to keep it’s share if everyone else is losing manufacturing jobs as well.

          This idea that Mexico and China have taken the jobs is ludicrous. If we (the Western OECD world) want to survive competing with low income countries is not the answer, unless you want their living standards.

          This is why T shirts are manufactured in Central America and SE Asia. Some industry and manufacturing is better off shore, unless you want to lose standard of living.

          Paying more for an equivalent or in some cases lower quality product because it’s local is not a good idea either. You are protecting nothing and costing jobs in the end, as people will have less disposable income to spend, thus creating jobs.

          Handpicking industries is not to bright either, look at your corn, dairy, lumber, etc industries. Totally reliant the government protection. In the end you pay more for product and taxation to cover the protected industries.

          • 0 avatar
            DenverMike

            @BAFO – Even Mercedes is bright enough to settle on a loophole that completely avoids the Chicken tax. Why would any automaker willingly pay it? That’d really be Chicken brain, unlike you. Then again…

        • 0 avatar
          DenverMike

          “Trade” is clearly lopsided when it comes to China or even Europe, not to mention EU 10% levy on US autos and other trade barriers against them. But with Mexico, it’s not so simple.

          Clean/loaded used Tacomas pulled from the US market are a prized possessions when they return home to their native Mexico. This is instrumental in their ridiculously high “resale” as they’re lifted from US circulation.

          Except consider Tacos a tip of the ice burg as we’re losing at least a million US (sold) used pickups to (legal) exports to Mexico. But then pickups are a tiny fraction of all the used autos; that are exported to Mexico, not counting “stolen”, but including RVs/trailers/simis, up to mobile homes. The US economic ecosystem is more reliant on this than you think.

          But never mind all those, there’s virtual mountains of electronics, appliances, furniture/furnishings, power tools, clothes, etc, etc, just everything you can imagine, exported to Mexico daily from the US secondary market, most barely used, flowing free and unobstructed.

          Would Mexican officials put a stop to this circus in retaliation to the killing of NAFTA?? I can’t wait to find out!

      • 0 avatar
        Art Vandelay

        Can you imagine how absurd and foreign it would sound to most Americans if when inevitably a Chinese company decided they wanted to enter the US market we told them “Sure, so long as you partner with GM or Ford so they get their cut of the action and you give them access to all of the technology involved with the cars you will sell here. Not that Chinese car tech is “bleeding edge” but come on, to say such a scenario is fair is ridiculous.

        The European playing field is a little more level with each side having their own stupid taxes but still, they give as good as they get with respect to the chicken tax.

        The US Needs trade, but a healthy manufacturing sector is also important both economically and I think even from a national security perspective. The more oil and other forms of energy we can produce domestically, the better. I look forward to a day when the middle East flares up and our leaders give China a great big, “well, sucks to be you”

        • 0 avatar
          Big Al from Oz

          Art,
          What you state is correct.

          So, why does the US not change the partnering of companies that set up shop?

          The reality is the US will lose trillions of dollars. Do you not think the Chinese will be confronted with this problem?

          The laws of economics affect China no differently than they affect the US.

          So, your argument is really nulled.

          Another part of the question should be; Why are foreign companies investing in China with the partnering laws?

          The companies are obviously making money.

        • 0 avatar
          DenverMike

          At a 400% higher EU import tariff, does that sound like a “level playing field” to you? The US Chicken tax stays inplace just for EU Chicken tax. Europe is fiercely protective of their auto industry, which is exactly why their vehicle regulations vary so greatly from ours.

    • 0 avatar
      quasimondo

      Everybody tells themselves that same lie, but we all know when that happens, there is nothing but kvetching about how expensive such a car is as they blame it on the UAW.

  • avatar
    DenverMike

    Sorrry BAFO, no Chicken tax can “protect” against fullsize pickups/SUVs imports that can only exist in your scrambled brain.

    Except the European Chicken tax equivalent really does target fullsize pickups you can actually touch and feel, no illusions or delusions necessary.

  • avatar
    DenverMike

    There’s a lot of options to be exploited here, not so much the OMG The Sky is Falling.

    The Mexico Corolla would only face a 2.5% import tax if NAFTA was killed, so it’s Tacoma assembly that would come back to the US. Still a 90% assembled Taco crossing the border would avoid the Chicken tax completely for around 3% added costs to finish.

  • avatar
    King of Eldorado

    Or, they could simply end the chicken tax alone, independently of what happens to NAFTA, no? It’s always been anticompetitive, not to mention giving rise to ridiculous work-arounds such as shipping cargo vans over as passenger vehicles and then removing the seats.


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