Toyota Says Mexican Tariffs Could Cost Its Suppliers Over $1 Billion

Toyota has warned its dealerships across the United States that tariffs on Mexican imports being proposed by the Trump administration could increase auto-parts costs by over $1 billion.

In a letter sent to dealers and viewed by Bloomberg, the Japanese car manufacturer said tariffs could increase expenses among its major suppliers by between $215 million and $1.07 billion. Toyota believes tariffs on Mexican goods could have a particularly detrimental impact on the Tacoma pickup truck because 65 per cent of them sold in the U.S. are imported from Mexico.

Toyota builds some Tacomas at a factory in San Antonio, Texas but the majority are built in Tijuana, Mexico. Toyota planned to deliver approximately 246,000 Tacomas this year.

Also Read: Trump Announces 5% Tariff On All Goods From Mexico, Including Cars

The letter came from Toyota executive vice president for North America Bob Carter and added that the proposed tariffs will have an effect industry-wide, noting that General Motors is the largest automotive importer from Mexico.

President Donald Trump says he will apply tariffs of 5 per cent on all Mexican goods imported into the United States on June 10 if Mexico is unable to halt the ongoing flow of illegal immigration. These tariffs could ramp up in increments to 25 per cent by October.

Consultancy LMC Automotive believes tariffs could have a detrimental impact on the economies of Mexico and the United States, potentially cutting new vehicles sales in the U.S. by up to 1.5 million units annually.

“A prolonged period of tariffs on Mexican imports would likely push Mexico into recession and could also threaten a recession in the United States,” LMC said.

Prices of vehicles imported from Mexico could increase by an average of $8500, LMC asserts.

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  • Giannis Antypas

    There are options:

    either Mexico decides to halt the flow of illegal immigration so as not to fall into recession
    Toyota decides to increase production in US plants so that its cutomers can buy products exempt from tariffs.

    • Jason Miller

      I’m sure they will just get right on that.

    • Adilos Nave

      Everything must be so simple in your world!! Ever worked with anything involving supply chains?

      • flyfish

        I have Zero knowledge about supply chains. Toyota and all manufacturers need to put pressure on the Mexican government to help stop the flow of illegals into the US or there will be major economic issues. It really is that simple.

        I can promise you I will not buy a Taco for 8k more then today’s price, I will wait it out. The ramifications of that last statement will have huge economic impacts to all involved.

        Not sure what is going on in Mexico but but it together. As for our inept (past and current Congress), please wake up and do your jobs, you work for the taxpayers are replaceable.

        • Adilos Nave

          No, it really isn’t that simple at all. Is there a measurement to determine if their efforts are actually making an impact? Without that, pretty difficult to say the tariff will continue to increase until Mexico does ‘something’ to reduce illegal immigration into the States. And don’t think for one second that companies will just let the tariffs eat into their bottom line. Nope, this is absolutely a tax on regular citizens in that EVERYTHING we pay for will increase one way or another. People will lose jobs and inflation will be high.

      • Giannis Antypas

        @evansolida:disqus ‘In my world’ as well as in real world, things are plain simple when all sides are motivated to compromise.
        In your world things can be hard when there are pretexts.

    • Fernando Bretón

      If stopping illegal immigration is so easy, why isn’t the US doing it by itself? Why does they need Mexico to do it for them? Last time I checked, the US border is the US’ responsibilty.

      • Giannis Antypas

        Internal policies are not comparable to state relations.
        Moreover the one – ie Mexico’s obligations towards the USA – does not exclude the other which is USA’s right to defend its rights and interests.

        • Fernando Bretón

          Obligations… lol, sure pal. Defending rights and interests goes both ways.

          • Giannis Antypas

            Yeah you are talkinhg as if a state – in our case Mexico – has the sovereign right of abusing its neighbours.
            OK definitely that.

          • Fernando Bretón

            Exactly my point, how is it abusing its neighbors? Why is it that Mexico needs to serve as a buffer zone protecting the US border, while being a separate, independent country? You make no sense.

          • Giannis Antypas

            Because it is the flow coming from Mexico that causes the problem.
            Not from the US to Mexico.
            Unless you are suggesting that illegal immigration is a factor that should be taken for granted.
            Yeah you make more sense…

          • Ken Lyns

            It’s not Mexico’s responsibility to prevent its people from leaving the country. 😉 What do you think they are, North Korea?

    • Ken Lyns

      Or the automakers file a lawsuit against the US Dept of Commerce as the tariffs contravene existing trade agreements between the US and Mexico…

  • brn

    “Tariffs Could Cost Its Suppliers”
    This suggests Toyota is expecting it’s suppliers to absorb the cost?

    • Joe

      Or also that the suppliers will lose sales to competitors who will be better able to compete on price if the suppliers Toyota speaks of are stuck with a 25% tariff that will essentially increase the price for US consumers.

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