Toyota Shift to US Sparks Fears for Mexican Car Industry

Toyota’s decision to move some Tacoma truck production from Mexico to Texas has sparked fears for the Mexican car industry, as uncertainty over US-Mexico trade policy increases. The US has opted against a long-term renewal of the USMCA trade pact, and analysts and industry sources say the shift reflects tariff risks and USMCA changes. Mexico’s auto industry accounts for 4.5% of the country’s GDP, and exports are already weakening. Other automakers, including General Motors and Hyundai, have also announced plans to shift production to the US or adjust supply chains. The Mexican government’s doubts about future US-Mexico trade ties are prompting more automakers to review backup production plans and reassess long-term deals tied to plant expansions. Toyota’s decision could foreshadow a regional reset, as the prospect of shifting tariffs and rules of origin for vehicle parts further erodes the predictability that has underpinned the sector for years. The auto industry is well-known for long-term planning, and Toyota’s North American headquarters said in a statement that its investments are multi-decade decisions based on broader strategic goals. The company’s commitment to build where it sells and exceed customer expectations remains unchanged. However, the shift in production is likely to have a significant impact on Mexico’s economy, which has a lot to lose. Carmaking is the crown jewel of its export-focused manufacturing base, and the country’s already battered economy is facing further challenges. The average tariff on vehicles made in Mexico and imported by the US is almost 19%, higher than the 15% duty slapped on some vehicles imported from South Korea or Japan. While some analysts point out that Mexico’s overall vehicle exports continue to rise, others fear that more announcements like Toyota’s could be made in the coming months, as hopes fade for lower US tariffs on Mexican-made vehicles anytime soon.