Donald Trump’s recent Twitter tirade against Toyota harmed more than just Toyota stock as several other companies’ stock took a hit.
Trump’s Tweet targeted Toyota Motors for its plans to expand its manufacturing base in Mexico. Trump claimed Toyota planned to build a new plant in Baja, Mexico, though apparently Trump was confused about the location. The new $1 billion Mexican Toyota plant is based in Guanajuato, not Baja.
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.
— Donald J. Trump (@realDonaldTrump) January 5, 2017
Additionally, Toyota already began construction of the facility back in November. The announcement for the new facility was made back in 2015, so no doubt Donald Trump’s Tweet is his flexing his Twitter muscle after claiming he convinced Ford to move their planned Mexico factory to Michigan, and perhaps also because of his claimed success with the 1,000 Carrier jobs.
According to CNN Money , “Trump threatened to slap a 35% tariff on Ford vehicles made in Mexico and sold in the U.S., although experts say it is not possible for Trump do that to a single U.S. company.”
Toyota and Ford are not the only targets for Trump’s Twitter bashing. General Motors took a Twitter shot with a variation on the Trump standard threat, “Make in USA or pay big border tax!”, faced by many businesses with plants in Mexico.
General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A.or pay big border tax!
— Donald J. Trump (@realDonaldTrump) January 3, 2017
The new Toyota plant will be building Corollas, with expected production of about 200,000 cars per year. The plant, which is not expected to cost jobs in the U.S., is taking over production of the Corolla from a plant in Canada.
One of the biggest things to note concerning Donald Trump’s Tweet against Toyota was the result to the automotive stock market. Fortune reported “Toyota shares fell more than 3 percent before recovering, and Honda Motor Co and Nissan Motor Co slid around 2 percent – even as the government and analysts sought to brush off the impact of the attack.”
Trump’s targeting of Mexico-based manufacturing plants is also concerning to the auto industry for more than just car manufacturing, or rather, specifically the building of the cars. Many auto plants are assembly only, where components are brought in and built into the final structure, but are not actually cast on site.
What this means is that if Trump starts targeting not only the automotive assembly plants, but also the component plants, car prices can be expected to increase because multiple parts of the manufacturing process are seeing increased costs.
Typically, an assembly plant will be surrounded by component plants that may not be part of the car company. An example of this is the relationship of Aisin Seiki Co. and Denso Corp. to Toyota and other car manufacturers. The two companies produce parts for car assembly.
Increased costs in either labor or transportation for the suppliers often is transferred over to the assemblers. Assuming, of course, the assembler parent company continues using that supplier and doesn’t simply switch suppliers or produce their own.
In addition to the location error in Donald Trump’s Tweet, Trump seems to be ignoring the longer-term Toyota strategy. The Wall Street Journal claims “at a New Year’s gathering, Toyota President Akio Toyoda said his company is aligned with the incoming administration in that it wants to be a good corporate citizen and expand employment in countries where it operates plants, including the U.S. ‘If you look over the long term, we are oriented in the same direction.’”
Donald Trump has aimed at Japan and Japanese industry multiple times through his campaign and now as President-elect. Trump has criticized Japanese trade barriers and the cost of US military protection. Another concern by some Japanese analysts is the under-performing Yen.
As the New York Times points out, “Mr. Okubo of Japan Macro Advisors said Mr. Trump might also accuse the Bank of Japan of currency manipulation, given that in inflation-adjusted terms, the yen is at a 40-year low.”
Only time will tell what the relationship between Donald Trump, Toyota, and Japanese industry in general will bring.
So what do you think of Donald Trump’s intense pursuit of Made-In-America? Tell us your thoughts in the comments section below!
[Featured Image by Junko Kimura/Getty Images]