Trump sets Precedent with Toyota and other Automakers by Threatening with Outrageous Tax

President-elect Donald Trump hints at strained political relations between the US and Mexico yet again, this time through the medium of Japanese car giant Toyota Motor Corp. (NYSE: TM). Trump administration focuses on reducing the trade deficit with Mexico through special tariffs and other trade barriers that would give a big blow to the US automobile companies that moved production to Mexico. The Trump administration proposes to make significant policy changes in the North American Free Trade Agreement or do away with it completely.

After General Motors Company (NYSE: GM) and Ford Motor Co. (NYSE: F), Toyota has become the next target of Trump’s criticism. He has threatened the firm with heavy border tax if it moves its production unit to Mexico. The company, as of now, plans to set up a $1 billion plant in Guanajuato in Central Mexico where it intends to manufacture 200,000 Corollas. Toyota also plans to increase production capacity at its plant located in Tijuana, Baja California, where the company makes Tacoma pickup trucks.

Trump’s attack on Toyota sparked international attention and caused Jorge Guajardo, the former Mexican ambassador to China to express his disapproval on Twitter. Trump’s election was a promise to restore the jobs in US manufacturing companies, and the President-elect has spent considerable time instructing US car manufacturers to move their production units out of Mexico. He threatened Companies with retribution and imposition of a high tax rate of 35% on these companies. Aerospace firms Lockheed-Martin and Boeing also face Trump’s criticism.

Donald Trump’s move have shadowed cross-border manufacturing networks that exceed $583 billion annually in between the US and Mexico. Scott Vazin, Toyota’s spokesperson said that the company looks forward to a collaboration with the Democratic administration to serve in the best interest of the automobile industry and consumers. Toyota President Akio Toyoda announced on Thursday in Japan that the car maker does not intend to stop production in Mexico until Trump’s inauguration on January 20, thus waiting for future events to take shape.

Toyota has whopping investments in the US, where it operates 10 plants in eight states, producing more than 1.3 million cars annually. Since 1994, jobs in Mexico’s automobile factories have hiked tremendously as low-cost production started gaining momentum. Since 2010, the country has successfully attracted over $24 billion in automobile investments. Mexico’s automobile production is expected to increase by 50 percent over the next five years. Trump’s strategy to retain auto jobs in the US has certainly sparked uproar in the automobile industry, and anticipation builds as not much can be said about the policy changes directed towards the industry after Trump assumes office.

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