Trump threatens Toyota

Toyota will face ‘big border tax’ if Mexico plant makes US cars, Trump says.

Donald J. Trump (@realDonaldTrump)

Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax.

January 5, 2017

The $1bn plant will be located Guanajuato, a state in central Mexico, not Baja California, as Trump tweeted. Toyota plans to increase capacity at an existing plant in Tijuana, Baja California, that makes Tacoma pickup trucks.

Trump, who was elected on a promise to restore US manufacturing jobs, has spent the week instructing automakers to move their compact car production out of Mexico. On Tuesday he told GM that it too must weigh his opinion favorably against the financial efficiencies offered on foreign soil. “Make in U.S.A. or pay big border tax!” Trump tweeted.

Last month Trump threatened “retribution” against companies outsourcing factory work to foreign facilities. “There will be a tax on our soon to be strong border of 35% for these companies,” he tweeted, naming car and air conditioner manufacturers in the same series of remarks.

Instead of taxing air conditioner company Carrier more for exporting jobs, however, Trump and Indiana governor Mike Pence offered the Indiana-based company $7m in tax breaks to keep about 1,000 jobs, but allowed more than 1,000 Carrier jobs to move to Mexico.

In recent weeks, Trump also threatened aerospace firms Boeing and Lockheed-Martin, both of which rely heavily on government contracts for multibillion-dollar revenues. Those threats, also tweeted, shocked shareholders and caused stock prices to plummet.

But threatening car companies with taxation has barely caused the market to blink. The US president cannot personally levy taxes; that duty falls to state legislatures and the US House of Representatives, which holds the “power of the purse”.

Toyota operates six manufacturing plants in the US, employing more than 31,000 in 2013 and creating more than 184,000 indirect jobs in 2013. Total US employment created by Toyota is 365,000 according to this report.

This is a large number of employees, which legislatures will consider carefully before implementing any tax hikes which may result in lost jobs.

Trump’s campaign platform heavily criticized companies for moving labor out of the US, but thus far his favored method of dealing with corporations has been rewards via back channels, rather than punishment.

Source: The Guardian newspaper web site.

Advertisements