After a year of tariffs, automakers are still resistant to moving production to the US
Automakers Show Limited Enthusiasm for Relocating Manufacturing Despite Tariff Pressure
After a year of tariffs automakers – Toyota made headlines last week by undertaking a move that many of its competitors have hesitated to embrace: transferring a portion of its manufacturing operations from Mexico to American soil. The Japanese manufacturer plans to assemble half of its highly popular midsize Tacoma pickup trucks at a newly expanded facility in San Antonio. This location already serves as a production hub for the Tundra full-size pickup and the Sequoia sport utility vehicle. Nevertheless, Toyota will maintain its Mexican operations for Tacoma manufacturing as well.
President Donald Trump celebrated the announcement, describing it as “a really big deal” and evidence that “Tariffs at work!” However, the automaker did not point to tariff regulations as the primary driver behind this decision. In a statement to CNN, Toyota explained that “while we are impacted by evolving trade policies, our investments are multi-decade decisions based on broader strategic goals.” This distinction matters significantly, considering that more than twelve months have passed since the Trump administration unveiled comprehensive automotive tariffs designed to encourage domestic factory construction.
Reluctance to Change Course
Toyota’s announcement stands out as an exception rather than a pattern. Very few automotive manufacturers have revealed intentions to relocate production to the United States. The majority would prefer to absorb tariff expenses rather than commit billions of dollars toward constructing new facilities. Furthermore, the vehicles heading to American shores are typically moving into already-established factories rather than requiring entirely new construction.
Data from Mobility Global indicates that forty-six percent of automobiles purchased by American consumers last year came from overseas, representing only a marginal decline from the forty-seven-point-seven percent figure recorded in 2024. Part of this reduction stems from manufacturers discontinuing sales of budget-friendly imported models like the Nissan Versa. However, substantial financial barriers and ongoing uncertainty continue to prevent widespread alterations to manufacturing footprints.
“It’s a huge commitment (to build a factory) and to do it on a whim would be borderline crazy,” said Ivan Drury, director of insights at car buying site Edmunds. “So the safest action is no action. Continue on, even with that increased (tariff) cost.”
Trade Agreement Uncertainty Adds Complexity
One mechanism helping manufacturers manage expenses involves the US-Mexico-Canada Agreement, commonly known as USMCA. This trade framework, established during Trump’s initial presidency, is currently undergoing renegotiation. The president recently indicated he might abandon the agreement entirely if meaningful modifications favoring American businesses do not materialize. Such potential disruption worries automotive companies that have grown accustomed to seamless cross-border movement of components between the United States, Canada, and Mexico.
“We urge a swift and durable resolution that ensures a level playing field and provides long-term certainty needed for capital-intensive automotive investments,” said a statement from the American Automakers Policy Council, a trade group representing General Motors, Ford and Stellantis.
Financial Impact and Selective Relocation
Tariffs are increasingly affecting corporate profitability. Toyota reported paying $8.4 billion in duties during its most recent fiscal year, transforming its North American operations from profitable to loss-making. General Motors contributed $3.1 billion in tariff payments throughout 2025, while Ford’s share reached $1 billion.
That said, tariffs have not proven entirely ineffective at encouraging domestic production. Beyond the Tacoma situation, General Motors announced last year that it would relocate assembly of two SUV models from Mexico. The company also plans to cease importing a Buick SUV from China, opting instead to manufacture a replacement version domestically. These vehicles will utilize existing facilities in Kansas and Tennessee—plants that gained capacity after GM reduced its substantial electric vehicle investments following congressional Republicans and Trump ending federal EV support.
For Toyota, additional commercial considerations beyond trade policy influenced the San Antonio expansion. Patrick Anderson, a Michigan-based economist specializing in the automotive sector, noted that “Toyota has been very successful at growing its truck business in the United States, and their San Antonio production is already the mainstay of that in the United States.” He added that “it makes natural business sense to consolidate existing operations.”
Even with elevated tariff levels, relocating production solely based on trade regulations may prove impractical. Such policies can change more rapidly than the years required to construct new facilities. Industry specialists estimate that manufacturers would need several years and billions of dollars to build or expand sufficient American plants to substitute imported vehicles—particularly when future administrations might reverse current policies. American labor costs remain higher than those in Mexico and other nations. Meanwhile, consumer demand stays robust; total vehicle sales increased by two percent last year despite reaching record-high pricing levels, encouraging manufacturers to maintain steady import flows.
