Toyota, once buoyant and optimistic about candidate Trump, are experiencing buyers remorse after seeing his foreign trade policy in action. The company donated 1 million USD to his inauguration, excited by his rhetoric regarding dismantling the United States push towards electric vehicles. Instead embracing a return to fossil fuel and hybrid vehicles. A realm in which Toyota is a key player. Trump’s tariffs on Toyota and other foreign automakers has turned this jubilance into panic.
A Double Blow for Toyota and the Japanese Economy
Long gone are the beaming smiles seen in January at the Dallas Toyota dealership as Trump fever gripped all in attendance. This joy was short lived as on February 25th the administration enacted 25% tariffs on Canada and Mexico, two hubs of Toyota’s manufacturing for their products sold in the US.
Things went from bad to worse when it was announced that Trump would target countries with a trade surplus with the United States. A category Japan certainly falls into. The approaching sanctions on April 2nd come at a particular devastating time for an economy already strained by inflation. Some economists are projecting that the tariffs could wipe away 40 percent of Japan’s expected economic growth for 2025.
Toyota produced around one million of the 2.3 million cars it sold in the United States last year outside the country. Executives from Nissan and Honda have warned that Trump’s proposed tariffs could significantly dent their profits. For Japan, where cars are the top export, a 25% tariff on automobile exports to the U.S. could shrink the nation’s GDP by approximately 0.2% this year, according to Japan’s Nomura Research Institute. The institute noted that, with Japan’s potential growth rate at just 0.5% this year, such a hit would deliver a “considerable blow.” Trump’s tariffs on foreign automakers could have devastating consequences.
Over Confidence and Failure to Adjust
Toyota has long bucked the trend as other automotive manufactures pivoted to make electric vehicles spurred on by the remarkable rise of companies such as Tesla and BYD. Toyota stuck to its guns, stating that giving consumers affordable vehicles and a variety of choices was the path to reducing emissions.
This coupled with its successes in skirting tariffs during President Trump’s first campaign led to Toyata’s misassumptions that they would be safe again this time around. In 2016 under the leadership of the late Shinzo Abe they were able to placate Trump who has held hostile feelings towards the Japanese auto industry since the 1980’s. Quoted as saying that they come to the United States and “knock the hell out of” local manufacturers. It seems that this time Trump’s tariffs on Toyota may “knock the hell” out of Japan’s Economy.
Source
Explore more entrepreneurial insights and success stories at Inspirepreneur, your go-to magazine for business innovation and leadership.
