Jim Lentz, the Chief Executive of Toyota North America, has announced during the Detroit auto show that the Japanese company will make a capital investment of $10 billion in the United States. The amount of money equals prior investments from the automobile giant during 2010 to 2016. This move by Toyota comes after making of similar commitments by its competitors Fiat Chrysler and Ford.
It seems that Trump has pulled out yet another ace. He has particularly targeted Toyota through social media. In his tweet, the President-Elect has expressed his disapproval of Toyota investing in Baja, Mexico for a factory which will build cars for the US market. He threatened the company with big border tax if Toyota does not manufacture cars in the United States itself. Trump had earlier congratulated Fiat Chrysler and Ford for their recent announcements related to investing inside the United States. The President-Elect tweeted that Fiat Chrysler has announced plans to invest approximately $1 billion in its Ohio and Michigan plants.
In its announcement, Toyota has made it clear that the $10 billion investment will be made over a period of five years. Majority of the money amount will go towards the outfitting of Toyota factories to manage vehicle production. The new automobiles will be crafted on Toyota's new modular platform. The Japanese company is heavily invested in the United States and also across the border in Mexico. The company has made it a promise to manufacture more vehicles close to where the cars are being sold.
According to Toyota, it employs about 136,000 people inside the United States. This number also includes people earning their living by being employed by the company's dealers. The company is also investing in Mexico. It is constructing a $1 billion factory in Guanajuato, a central Mexican city. The company plans to start production in 2019. The initial target is about 200,000 Corolla cars per year for North American market. The Corolla production will be moved from Cambridge in Ontario to Mexico's new plant. The Corolla cars will continue to be built at the company's Mississippi plant.
For all the Trump bluster, the reality is that the US trade deficit is of no consequence in the real world. A trade deficit means increased investments flowing to the United States. If foreign goods are sold, then Americans spend on them. It means that there will always be a trade deficit.