Trump Hands Toyota a Production Dilemma

The Trump administration’s protectionist trade position presents a manufacturing quandary for Toyota Motor Corp., The Nikkei says.

Trump wants the company to make more cars in the U.S. to avoid the threat of new import tariffs there. Yet Toyota has pledged to increase its annual domestic production in Japan to at least 3 million vehicles.

Toyota has said it plans to invest $10 billion in its North American operations over the next five years. But that may not be enough to placate President Trump, with whom Japan Prime Minister Shinzo Abe will meet in Washington, D.C., on Friday.

North America is Toyota’s most important market, generating about 30% of the company’s worldwide sales and 40% of its operating profit. But a sizeable domestic production base is critical to Toyota’s ability to maintain its global competitiveness, according to The Nikkei.

The newspaper points to Toyota’s concentration of parts suppliers in central Japan, which will play a key role in the company’s goal of reducing its costs by 200 billion yen ($1.8 billion) per year. Shifting too much production from Japan to the U.S. could upset that effort, according to the report.