Yesterday The Conservative Treehouse reported that Toyota has announced the following:
- By 2021, Toyota will now invest nearly $13 Billion in its U.S. operations with plans to add nearly 600 new jobs at American manufacturing plants
- Hybrid versions of the popular RAV4 and Lexus ES to be produced in Kentucky for the first time
- Production capacity increases and building expansions at Toyota’s unit plants in Huntsville, Alabama, Buffalo, West Virginia, Troy, Missouri and Jackson, Tennessee
The article states that this is a direct outcome of the NAFTA replacement USMCA trade deal; and the new 75% rule of origin within the Auto sector.
The article explains:
The guiding decision here relates specifically to the construct of the USMCA (NAFTA replacement). Toyota was previously focused on multi-billion-dollar investments in Canada as they exploited the NAFTA loophole and procured component parts from Asia for North American assembly and shipment into the U.S. Market. However, when they renegotiated NAFTA and created the USMCA President Trump and USTR Lighthizer closed closed the loophole.
The new USMCA agreement requires that 75% of automobile parts must be made in North America; and 45% must come from plants with minimum labor costs ($16/hr); or face tariffs to access the U.S. market with the finished good. As a result Toyota has to either pay a tariff to continue importing Asian component parts, or move the higher-wage component manufacturing directly into the U.S.
Obviously, Toyota chose the latter.
The article explains that Toyota is not the first automobile company to respond to USMCA:
Keep in mind Toyota is not the first Auto manufacturer to respond with increased U.S. investment. Prior to the USMCA German auto-maker BMW began building a $2 billion assembly plant in Mexico. Under the old NAFTA plan most of BMW’s core parts were coming from the EU (steel/aluminum casting components, engines, transmissions etc.) and/or Asia (electronics, upholstery etc).
However, under the USMCA the Mexico BMW assembly plant has to source 75% of the total component parts from the U.S, Canada and Mexico; with 45% of those parts from facilities paying $16/hr.
The result was BMW needing to quickly modify their supply chain, build auto parts in the U.S. and Mexico, or they would end up paying a tariff on the assembled final product.
Like Toyota, BMW made the financial decision to open a new engine and transmission manufacturing plant in South Carolina…. exactly as Trump and Lighthizer planned.
And don’t forget Fiat Chrysler made a similar announcement in February: “The automaker says it will hire 6,500 workers and invest $4.5 billion by adding a new assembly plant in Detroit and boosting production at five existing factories.”
Like him or not, President Trump is a businessman who is doing things that are helping the American economy and the average worker.