President Trump is waiting for good economic news to save his underwater job approval rating. So it’s not surprising he’s applauding Toyota’s announcement Tuesday that it will expand truck production in Texas. This is a distraction from the disappointing reality that their border taxes are driving up costs and failing to bring about a manufacturing renaissance.
DALY CITY, CALIFORNIA – FEBRUARY 28: Toyota Tacoma trucks are displayed at the point of sale at City Toyota on February 28, 2024 in Daly City, California. Toyota has announced plans to recall approximately 381,000 Toyota Tacoma pickup trucks due to a problem with parts falling from the rear axle that could lead to a crash. (Photo by Justin Sullivan/Getty Images)
Toyota said it plans to invest $3.6 billion by adding a second assembly line at a new San Antonio facility to produce its Tacoma trucks, creating 2,000 jobs. The Japanese auto maker currently produces the Tacoma in Texas and Mexico, so it will move production south of the border.
Music to Mr Trump’s protectionist ears. “Toyota is moving from Mexico to the United States (Texas!). A big deal indeed. Tariffs are at work!”. The President wrote on social media. Sorry to curb enthusiasm, but Toyota may have made this decision for business reasons unrelated to its tariffs.
The Japanese carmaker’s press release lavishly praised Texas’ pro-business environment and included statements from the state’s political leaders (except Attorney General Ken Paxton). No mention of Mr. Trump or his tariffs. Toyota says the new plant will provide “flexibility” from “advanced manufacturing technologies” that can offset relatively high labor costs in Texas.
But the President is right that his tariffs are working – destroying American jobs and raising prices. The US could lose about 75,000 manufacturing jobs by January 2025, including 25,900 jobs in motor vehicle and parts production. Manufacturing jobs have been declining since as early as 2023, so not all of these job losses are due to Mr. Trump’s border taxes. The loss of some auto jobs is likely the result of electric-vehicle failure.
Still, there is no doubt that his tariffs are raising costs for American manufacturers. Additionally, foreign retaliation has hurt America’s farmers and led to a decline in purchases of farm equipment. The slowdown in business has also reduced the demand for semi-trucks.
According to US government data, as of April this year Mr Trump’s Section 232 national security tariffs on autos and parts cost $35.2 billion, and his steel and aluminum tariffs cost $17.5 billion. Mr Trump and his advisers claim foreigners pay their border taxes, but evidence shows American companies, workers and consumers are picking up most of the tax.
Anderson Economic Group estimates that auto tariffs in Canada and Mexico alone added about $1,600 to the cost of each U.S.-made car last year. While auto makers absorbed some of the Trump tariff costs, they also passed a large share on to customers.
A March report from Cox Automotive found that the tariffs caused the average suggested retail price of a new car to increase by 10.4%. Sticker prices increased to an estimated $5,000 to $8,900 for imported vehicles and approximately $1,600 to $2,000 for US-made cars. Auto dealers—the majority of which are small businesses—absorb about 4.5% of the manufacturer’s price increase.
Dealers have shed 6,100 jobs since Mr. Trump became president. Cause and effect? Manufacturers have also added charges to avoid increasing the base price. Cox says GM and Ford charge a “destination fee” of $2,795 for full-size trucks and SUVs. GM has increased such fees by 40% (about $800) on its Chevrolet Silverado. Call it the Trump Tax.
Auto makers have also reduced imports, and in some cases stopped selling entry-level models as tariff costs make them unaffordable. One result is that young and middle-class Americans are struggling to buy new cars, especially in the wake of Biden’s inflation push.
Many people are driving clunkers longer – and paying more for repairs when they break down – or buying used cars. New vehicle sales averaged 15.9 million in the first half of this year, up from 17 to 18 million in the five years before the pandemic. When people buy fewer cars, auto manufacturers don’t need as many workers.
The uncertainty looming over the extension of the US-Mexico-Canada trade agreement is delaying some investments because businesses don’t know what trade rules or tariffs will be in a few years – or even tomorrow with Mr Trump. His trade fluctuations and border taxes are a major reason why the economy has not performed as well as during his first term, and why Americans are so unhappy.
