USMCA Consequences – Toyota Increases U.S. Investment to $13 Billion, Expands Component Manufacturing in AL, KY, MO, TN, and WV…

Toyota made a huge announcement today [SEE HERE] that’s a direct outcome of the NAFTA replacement USMCA trade deal; and the new 75% rule of origin within the Auto sector.

The Toyota announcement is a total of $13 billion investment and includes expanded component part production in: Alabama ($288 million), Kentucky ($238 million), Missouri ($62 million), Tennessee ($50 million) and West Virginia ($111 million).   Additionally, Toyota will open a new assembly plant in Huntsville, Alabama ($1.5 billion) and serious investments in several other areas. [Details Here]

The guiding decision here relates specifically to the construct of the USMCA (NAFTA replacement).   Toyota was previously focused on multi-billion-dollar investments in Canada as they exploited the NAFTA loophole and procured component parts from Asia for North American assembly and shipment into the U.S. Market.  However, when they renegotiated NAFTA and created the USMCA President Trump and USTR Lighthizer closed closed the loophole.

The new USMCA agreement requires that 75% of automobile parts must be made in North America; and 45% must come from plants with minimum labor costs ($16/hr); or face tariffs to access the U.S. market with the finished good.  As a result Toyota has to either pay a tariff to continue importing Asian component parts, or move the higher-wage component manufacturing directly into the U.S.

Obviously, Toyota chose the latter. They made the best decision for their financial plan; and the right decision for the U.S.   This outcome is exactly how tariff and countervailing duty applications are supposed to work to protect U.S. workers and manufacturing.

With the increased Steel and Aluminum manufacturing coming on-line, also a result of well-placed countervailing duties, the raw material for the Toyota component group is now available in the U.S. to make the parts 100% Made in the USA.

How’d ya like them apples.

Oddly enough we predicted these moves in August 2018 right after we learned of the USMCA details.  At the 30,000 ft level, the USMCA deal positioned Mexico and Canada to retain the current multinational investments, but slowly work through a process to withdraw any advanced manufacturing investment. Through a series of sector-by-sector standards on origination the USMCA deal puts the decision-making on the companies while simultaneously closing the fatal NAFTA loophole.

The USMCA agreement makes an economic manufacturing partnership between the U.S., Canada and Mexico.  For assembly products like Autos third party component providers will have to produce the actual parts and origination material within North America.

U.S.T.R. Lighthizer put the details forward:  ♦The NAFTA Loophole closure is explained in Summary Form HERE; with emphasis on the Auto-Sector.  The key is a 75% part origination level for auto-assembly; and a 40-45% level for parts with a minimum $16/hr wage rate.  The final auto-sector source-origination rate (75%) was higher than anyone thought possible during the lengthy negotiations.

Keep in mind Toyota is not the first Auto manufacturer to respond with increased U.S. investment.  Prior to the USMCA German auto-maker BMW began building a $2 billion assembly plant in Mexico.  Under the old NAFTA plan most of BMW’s core parts were coming from the EU (steel/aluminum casting components, engines, transmissions etc.) and/or Asia (electronics, upholstery etc).

However, under the USMCA the Mexico BMW assembly plant has to source 75% of the total component parts from the U.S, Canada and Mexico; with 45% of those parts from facilities paying $16/hr.

The result was BMW needing to quickly modify their supply chain, build auto parts in the U.S. and Mexico, or they would end up paying a tariff on the assembled final product.

Like Toyota, BMW made the financial decision to open a new engine and transmission manufacturing plant in South Carolina…. exactly as Trump and Lighthizer planned.

And don’t forget Fiat Chrysler made a similar announcement in February: “The automaker says it will hire 6,500 workers and invest $4.5 billion by adding a new assembly plant in Detroit and boosting production at five existing factories.” (more)

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This entry was posted in Auto Sector, Big Government, Big Stupid Government, Canada, Decepticons, Donald Trump, Economy, Election 2020, energy, European Union, Legislation, media bias, Mexico, NAFTA, President Trump, Trade Deal, Uncategorized, USA, USMCA. Bookmark the permalink.

79 Responses to USMCA Consequences – Toyota Increases U.S. Investment to $13 Billion, Expands Component Manufacturing in AL, KY, MO, TN, and WV…

  1. Linus in W.PA. says:

    Coming at you like a freight train rolling!!!!!!!!!!

    TRUMP 2020!!!!!!!!!!!!

    Liked by 23 people

  2. Damon Senior says:

    Excellent!!

    Liked by 3 people

  3. USTerminator says:

    Now make all electronics with 75% US origin. That would solve the trade deficit problem

    Liked by 9 people

    • John Good says:

      I recently read an article on Chinese Gov’t was probably spying & stealing US Technology thru Chinese Made power bars, extension cords, electrical outlet components, etc.
      Think about it, it would be so easy to give Chinese Hackers access to all our computers, servers, etc.
      This has caused enough of a concern here, that the article stated that we should be manufacturing our OWN components like these.

      Liked by 7 people

  4. Let’s hear how loudly the Dems will criticize this. Ah, that’s right we will not notice them. They don’t have to comment because we’ll be spending our time listening to the Dirty Dozen treacherous so-called Republican Senators bloviating on how they “stopped Trump” for the good of the Constitution….the bastards.

    Liked by 6 people

  5. Bill says:

    Winnamins and more Winnamins, just can’t OD on them.
    I think Donald has shed the looser limp the last guy left us saddled with.

    MAGA and KAGA

    Liked by 5 people

  6. The Boss says:

    How many of those states enjoying new investment have Decpticon senators and congressmen? And how many of them see the leverage coming?

    Liked by 3 people

  7. Jack Dempsey says:

    This is the rare instance where Trump does not take enough credit for real progress.
    Mr. President, more self-promotion, please.

    Liked by 4 people

  8. John Good says:

    As a Canadian, I hate to say this, but I hoped that Justin Trudeau would fail after he was “elected” & it looks like my “gut instinct” was right again!
    Remember the “leftist loon heads exploding” after Rush Limbaugh commented that ” I hope he fails” after O’Bama “won” the 08′ Election?
    Looks like Canada did not learn anything from O’Bama, except how to steal an election!

    Liked by 5 people

  9. Greg1 says:

    Previously the RAV4 was made in Canada. They imported a lot to the US. The Canadian vehicles will still be made there, however, Justin from Canada never anticipated that he would lose more of the jobs in his country to that pesky President Trump because Trump knows how to bring jobs HERE.

    Liked by 6 people

  10. jjs says:

    Isn’t the Green New Deal going to get rid of the industrialized world? So at this point what difference does it make? Utopia is just around the corner.

    Liked by 2 people

    • olderwiser21 says:

      We’ve got 12 years – 12 years, I tells ya! Beta was stumping right up there with the lipstick moron spouting this crap today. Unbelievable.

      Liked by 1 person

  11. lansdalechip says:

    I’ve got $20.00 says I know what WON’T be the headline on Friday’s New York Times.
    Shame that. Smart folks need to know what’s really going on with our economy.

    Liked by 3 people

    • Pyrthroes says:

      Always excepting Sundance, brains absent the sense of Friedman’s “one-armed economist” –who eschews the “on the one hand this, on the other hand that” approach– entail Hamlet’s “pale cast of thought” whereby “enterprises of great pith and moment … lose the name of action.”

      Among Trump’s great virtues is his clear-headed, far-sighted, grip on entrepreneurial risk/reward as the peaceable key to national security. All countries could, and should, cultivate this seminal awareness; but no other country has a Donald Trump.

      Like

  12. kiskiminetas says:

    DC leeches will be banging their heads against the walls because of this and the border wall continues to be built. That is win-win for all of us.

    Liked by 3 people

  13. WSB says:

    Rachel is a happy camper in that Toyotaphoto!

    Funny, how Kentucky is such a large recipient of Toyota’s business investment, yet Turtle treats our President with disdain.

    Liked by 4 people

  14. CountryDoc says:

    I am still waiting for him to attack the medical/industrial complex. He is making great strides with the new world order/uniparty/globalists, and bringing the bacon home to the US. When he turns his attention to the medical industrial complex, that is going to hit US healthcare companies the hardest. But it must be done

    Liked by 5 people

  15. Bendix says:

    Not to be a downer, but I hope there are no plans for Muslim-dumping in the places where these plants are located.

    Liked by 2 people

  16. climate religion atheist says:

    This is going to make good campaign material for the 2020 Trump Express! What do any of the Demonrats losers have to compare to this?
    Perhaps Trump can leverage this Into an AFL-CIO endorsement? That would stun the demonrats!

    Like

  17. mr.piddles says:

    $16/hr minimum wage? Crazy Bernie and Pocahontas should be 100% on board. *spit take emoji*

    Like

  18. mr.piddles says:

    “Oddly enough we predicted these moves in August 2018”

    Once again. Thank you for keeping us so acutely informed and educated on these important matters! ;^).

    Gotta celebrate. #MagicWandEpicFail

    Liked by 2 people

  19. Sound like Mexico and US were major winners in the USMCA and Canada was the loser

    Liked by 2 people

  20. ATheoK says:

    “For assembly products like Autos third party component providers will have to produce the actual parts and origination material within North America”

    Once again Canada’s ‘protecting their cultures’ screws Canadians as Trudeau causes Canada’s smelters and manufacturing centers to close; shuttered for using fossil fuels.

    Trudeau thought he could import cheap Chinese junk instead of employing Canadians at factory trades.

    Cultures, right.
    Culture of corruption.

    Liked by 1 person

  21. BSR says:

    Please please it’s too much winning. We can’t take it anymore. Mr. President it’s too much…

    Love the attitude but especially love the prophetic commitment to the people being upheld.

    Like

  22. redline says:

    On hearing this news, some eyebrows in Canadia may be raised, or furrowed, or knitted… Some may even fall clean off.

    Like

  23. Gary Lacey says:

    I know this isn’t a panache for laid off GM workers, but you folk have the best chance to land those jobs. Yes, you’ll have to move…something to remember…don’t take you Democrat politics with you.

    PS thank DJT for “making America Great Again”

    Like

  24. JimWVa says:

    Sundance: Thanks for the detailed descriptions of the trade and “countervailing duties” system. No easy way to shorthand the story, except MAGA-KAG!

    Like

  25. hellinahandbasket says:

    N O T so F A S T . . .No no no no NO!!! . . .Orange Man STILL bad!!!
    We’ve been told (by very reputable sources with crazy eyes, weird names and aggressive hand motions) that the world is going to END because of cars and trucks, and you’re saying we should be HAPPY to build MORE cars in North America….? I don’t think so, nice try Orange Man – we’re not falling for your evil shenanigans!
    .
    .
    .
    #MAGA

    Like

  26. Jeff Pico says:

    As GM heads to China. POS’s.

    Liked by 1 person

  27. Harlan says:

    “The Toyota announcement is a total of $13 billion investment and includes expanded component part production in: Alabama ($288 million), Kentucky ($238 million), Missouri ($62 million), Tennessee ($50 million) and West Virginia ($111 million).”

    And to the people in Alabama, Kentucky, Missouri, Tennessee and West Virginia, WTFU and stop voting for democrap socialists that will make it all go away.

    Like

  28. intercesser says:

    Once again Pres. Trump reminds everyone that so mush of life is about attitude and desire . Obama got the wins that he wanted , and Trump is getting the wins that he wants . An Obama win is a loss for us , but a Trump win is a win for us . We win , they lose . Wash , rinse , repeat .

    Like

  29. tonyE says:

    Hmm… how about you take a look at American Honda Motor Co. Huh?

    They’ve been manufacturing vehicles in NA for a long time. Given that most engines, transmissions, catalytic converters, heck all V6 vehicles, the vast majority of cars, are already manufactured in NA because it’s actually cheaper to produce than to ship.

    I think the only issue was the Japan quake that shut down some of their electronic suppliers… all over the globe -btw.

    IMHO, The Evil Empire, aka TMS, is finally doing what AHM has been doing for many years. And the Germans? Well, welcome to the South.

    And, yes, my Honda Ridgeline truck is a proud Daughter of the Confederacy… born in Lincoln, Alabama. Her V6 heart, God Bless her, was also born in Talladega County.

    None of them Yankee Civics and Accords with their Ontario and Ohio engines.

    Forget Toyota… they are transplanted carpetbaggers. 😉

    Like

    • sturmudgeon says:

      WOW! Tell us what you really think.

      Like

      • tonyE says:

        My wife won’t let me put a Confederate Flag on her nor a gun rack. But she did get me some cool “Sweet Home Alabama” window stickers.

        She’s concerned that it might be unsafe when we go to Los Angeles County.

        Like

  30. railer says:

    Excellent outline. You’ve hit the macro view on the button.

    I have a microscopic view that supports your analysis, however anecdotal mine is. I’m negotiating with Toyota for some facilities engineering work in their R&D. It’s new work and an expansion in their already robust R&D in NA. R&D is well upstream of product development and components and vehicle assembly, so obviously more R&D means more domestic product development and more final assembly (and more of everything, all the way down to the coffee shop guys). It promotes both jobs and better product, tailored to the NA market, so it’s better for consumers, too. This expansion, if it translates into a true corporate directional change as our host suggests is happening, fully supports his macro analysis.

    Never woulda thought I’d ever be working with our Asian brothers, 30 years ago. But I’m wisened and drooly today. I’ve been to the puppet show and seen all the strings. I drank the “free” trade koolaid back then, and look what it got us. Now it’s about these macro issues our host lays out with great facility. The multinationals can be our guest and make money, fine. But there are rules and requirements. Free and FAIR are the keys. That’s what can put money in my pocket (I hope!).

    Like

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