A tweet targeting Toyota by the incoming U.S. president has spread a renewed “Trump shock” among Japanese political and business leaders.
President-elect Donald Trump’s tweet blasted Toyota’s plans to make U.S.-bound cars in Mexico, threatening expensive tariffs.
While Trump’s stance on firms moving operations out of the U.S. was well-known before his election, businesses had been somewhat optimistic that U.S. companies would take the brunt of the impact if protectionist policies prevailed, observers say.
But in the wake of Trump’s latest tweet, some companies are giving second thoughts to plans to expand in Mexico, with one executive calling such a move “risky.”
Numerous Japanese companies have production bases in Mexico so they can export tariff-free to the U.S. under the North American Free Trade Agreement.
Some officials, however, have cautioned against reacting to Trump’s tweets and said companies should exercise patience, seeking to explain their contributions to the U.S. economy and the benefits of free trade.
Trump’s tweet Thursday came after Toyota President Akio Toyoda said in Tokyo that the automaker has no immediate plans to reconsider its envisaged production in Mexico.
In response to Trump’s threat, Toyota said in a statement that “production volume or employment in the U.S. will not decrease” as a result of its new plant in Mexico announced in 2015.
“Toyota looks forward to collaborating with the Trump administration to serve in the best interests of consumers and the automotive industry,” the statement said.
Toyota, Japan’s largest automaker, sold over 2.44 million cars in the U.S. last year, making it the third-largest in the market after General Motors and Ford.
Meanwhile, chemical giant Asahi Kasei said it is reviewing its own plan to build a plant in Mexico, instead weighing bolstered operations in the U.S.
“We’re considering expanding into Mexico, but depending on the course of events, expanding U.S. bases may be a better idea,” President Hideki Kobori said.
“We’ll wait until around spring to see the policies of the new U.S. administration,” he added.
Trump will take office Jan. 20.
Yoshimitsu Kobayashi, head of the Japan Association of Corporate Executives, said that the U.S. president-elect signaling protectionism could be part of a strategy. “We don’t have to fully accept it, but it does raise concern,” he said.
Kobayashi added that Toyota does not have to follow Ford, which canceled plans this past week to build a new factory in Mexico, but warned that it would be “risky” for Japanese firms to consider launching operations there.
“Toyota has made investments and created jobs in the United States,” Kobayashi said. “If the information is accurately communicated, the firm will not be required to withdraw its plan as Ford Motor Co. was.”
Yuzaburo Mogi, honorary chairman of soy sauce maker Kikkoman Corp., said firms should wait “about a year” to figure out what Trump’s actual policies will be.
“We should not be overly optimistic or pessimistic,” Mogi said. “We cannot judge his policy for at least about a year.
“For the U.S. to boost its economy, it has no option but to promote free trade,” Mogi added. “We need to take time to explain this to Mr. Trump.”
Nissan Motor Co. CEO Carlos Ghosn said he will pay close attention to Trump’s trade policy.
“We all want to be watching carefully … what’s going to be the new policy, what’s going to be the rules, particularly North American (trade) rules,” Ghosn told reporters in Las Vegas.
Trump has said he will focus on putting “America first” by pressing firms to keep jobs and production in the United States, vowing to renegotiate NAFTA, a deal concluded by the U.S., Canada and Mexico.
Under NAFTA, no tariffs are imposed on vehicles made in Mexico and exported to the U.S. Against that backdrop, Japanese, U.S. and European automakers have plants in Mexico, and suppliers and other related businesses also operate there.
Ghosn indicated patience is needed ahead of Trump’s inauguration.
“Nothing (has) happened so far,” Ghosn said, while adding that he “is fine” with the president-elect’s America First stance to create new jobs.
Nissan, Japan’s second-largest automaker, has major export bases in Mexico. It launched its Mexican production in the 1960s followed by Honda Motor Co. in 1995 and Mazda Motor Corp. in 2014.
Minister of Economy, Trade and Industry Hiroshige Seko told a news conference that the government will support the auto industry despite Trump’s threat. The industry has already established a local production system in the United States, he added.
“I don’t think there are plans to move U.S. production bases overseas, including to Mexico,” he said.
But with Trump indicating that the United States could slap a 35 percent tariff on imports from Mexico, an official from a major carmaker said that an extreme rise in tariffs “could lead to a possible reviewing of our production (in Mexico).”
Honda President Takahiro Hachigo echoed that sentiment, telling reporters Thursday that the company plans to stay in Mexico hopefully “for the continuation of the NAFTA deal.”
Shigenobu Nagamori, chairman and president of Japanese motor maker Nidec Corp., said Friday that he is not considering transferring production in Mexico to the U.S. However, he also said the company can make such a move “anytime,” because it has factories in the U.S.
Other industries are also wary of Trump.
JFE Steel, a unit of JFE Holdings Inc., and its U.S. partner are building a factory in Mexico to manufacture steel sheets for automobiles.
JFE Steel will not alter plans to start operations in 2019, President Koji Kakigi said in an interview.
But he also expressed anxiety, saying that firms would not be able to bear huge costs that would arise if NAFTA is revised and companies running business in Mexico are forced to move their plants to the United States.
Other Japanese business leaders voiced hope for an open business environment under Trump.
“I request world leaders to guarantee a free flow of people, products, money and information,” Sony Corp. President Kazuo Hirai said Thursday in Las Vegas, where he was attending the Consumer Electronics Show.
Sony exports DVDs produced in a plant in Mexico to the U.S.
“It is important how we react to the more specific plans he will have when he becomes president,” he said.