Trump’s Car Tariffs Worry Toyota and Japan’s Automakers

Before the elections, Toyota Motor and other Japanese car manufacturers thought that a Trump administration could be good for them.

President Trump had made a campaign for the dismantling of policies aimed at quickly accelerating the passage of American automotive industry away from fossil fuels and electrical-director vehicles that Toyota and other main manufacturers of petrol and hybrid electric cars had long opposed.

Toyota donated $ 1 million to the inauguration of Mr. Trump in January and to the participants in the meeting of the company’s dealership in Dallas that month said he was full of Trump’s joy.

But while Mr. Trump’s agenda took shape, much of that optimism has turned into alarm.

In February, the administration signed An executive order that imposes 25 % rates on goods from Mexico and Canada, where Toyota and other Japanese companies bring together many of the cars they sell in the United States.

The administration stated that on April 2 it will announce “mutual rates” on countries that manage great commercial surpluses with the United States – a move widely expected to hit Japan and its cars.

Japan is one of the largest car exporters to the world and the United States are the largest market for companies like Toyota, Honda, Nissan, Mazda and Subaru. So, as the tariff expiration approaches, Japan is preparing for a blow that could be devastating not only for the profits of the nation car manufacturers but to its general economy.

With the economy of Japan already suffocated By inflation, some economists estimate that if the car rates of Mr. Trump entered into force as threatened, this year they could sweep away 40 percent of potential economic growth.

Trump has a combative relationship with Japanese car companies for a long time. In the 80s, when he float the possibility of a presidential race, Trump blocked himself against the cars giants from Japan, once telling Oprah Winfrey who come to the United States and “eliminate” local producers.

Shortly after Mr. Trump was elected for the first time in 2016, Toyota went on plans Invest $ 10 billion in the United States. Former Japanese Prime Minister Shinzo Abe – who was considered a skilled Trump whisper – exploited The love of the President for Atlation and has ensured the promise of not imposing further duties on Japanese cars.

Japan’s success in rejecting the rates for the first time was part of the reason why many leaders in the automotive industry were optimistic – and even confident – on another Trump term. The other reason, in particular for Toyota, concerned electric vehicles, which Mr. Trump had mainly ridiculed before lately He declares himself a fan of Tesla, the company managed by his narrow councilor Elon Musk.

At the beginning of 2020, when many of its competitors rushed to electric vehicles, Toyota was still held at hybrid electric gas cars that had opened the road at decades earlier. The company claimed that the world was not completely ready for electric vehicles. They were expensive for consumers and infrastructures necessary to load the batteries remained incomplete.

The car manufacturers were also mainly loss electric vehicles. The prospect of the Roll Back initiatives of Mr. Trump intended to quickly stimulate the transition to electric cars was seen as a way to Toyota to buy time, since he had only one electrical vehicle of the mass market available in the United States.

Toyota has put pressure against the limits of pollution of the most severe extension tube and supported politicians in the United States who were against those who considered “sent” to sell more electric vehicles. Much of this lobbying came through the Toyota car dealers network, some of which, after being pushed by Toyota, transmitted their concerns on a rapid transition to electric vehicles to the elected officials, according to the correspondence seen by the New York Times.

A Toyota spokesman stated that providing customers with affordable prices and a variety of options was the best way to reduce emissions as soon as possible, which is the company’s goal. “A market led by consumers will bring more stability and a healthy competition to the automotive industry,” he said.

At the meeting of the January dealership in Texas, the leaders of the North America business of Toyota declared that they believed that the company had kept stopped during the presidency of Joseph R. Biden Jr. and that they now hoped to have more “related politicians” in positions of power, according to two people who participated in the event that were not authorized to speak public.

The following month, Trump outlined the plans for the rates that could affect cars exports from Canada, Mexico and probably Japan.

The plans of the Trump administration for rates have often moved. But the prospect of new fees on foreign manufacture cars is already weighing on Japanese car companies and some of their dealers in the United States.

In Maine, Adam Lee is the president of Lee Auto Malls, one of the largest groups of state car dealers. Lee Auto Malls sells brands including Toyota and last month he had the worst February in terms of net profit since 2009.

Since Trump has revealed his tariff agenda in the last two months, “faith in the economy has seemed the lowest that has been for a long time,” said Lee. “People do not buy cars when the world is in chaos,” he added.

Analysts expect Japan and South Korea, due to their great presence in the United States and the tendency to import many of the cars they sell there, to be the most exposed car countries to the rates proposed by Mr. Trump.

Toyota has made about one million 2.3 million cars that sold in the United States last year outside the country. The managers of Nissan and Honda warned that Mr. Trump’s tariff plans would be deeply in their earnings.

For Japan, whose most important exports are cars, a 25 % rate on automotive exports to the United States could reduce the gross domestic product of the country by about 0.2 percent this year, according to the estimates of the Nomura Research Institute of Japan.

Since the Japanese economy has a potential growth rate only by about 0.5 percent this year, a 0.2 percent blow to GDP would represent a “considerable blow”, according to the research institute.

For now, some Japanese car companies are trying to accelerate shipments to the United States before April 2. Preparations are also starting to increase production to the extent that they can in the 24 production plants operating within the United States.

Over the past seven decades, Toyota has invested over 50 billion dollars in the United States and will continue to deepen those investments, said a company spokesperson. Included in the United States, where more than 49,000 people directly employ, Toyota’s philosophy has always been to “build where it sells and buy where it is built,” he said. Toyota is also fully compliant with the commercial agreement of the United States-Messic-Canada, he added.

The groups representing the car manufacturers in Washington also worked on their contacts in Capitol Hill. They hope that legislators can help support the amount of Japanese car manufacturers who invest in the United States and how rates could damage American consumers by increasing prices.

So far they have Japanese officials failed to obtain promises of exemptions from rates.

Three people involved in the efforts of lobbying, who spoke on condition of anonymity to discuss private conversations, claim to be repeatedly asked: are there new investments they can commit to or those in the pipeline that can reconfirm as inspired by the new president?

At the moment, people have said, they don’t have new major projects to show.

Most Japanese car manufacturers do not have an excess production capacity in the United States, according to Michael Robinet, vice -president of the S&P Global Mobility automotive intelligence supplier. This means that if they want to produce multiple vehicles, they should build new factories.

But the factories would take years to build and request significant investments from companies that currently face a “highly unstable commercial environment”, said Robinet. “The car manufacturers do not make decisions that have many zeros behind them unless they know they have a solid business case,” he said. “And at this moment they don’t do it.”