Toyota Says Mexican Tariffs Could Cost Its Suppliers Over $1 Billion

Toyota has warned its dealerships across the United States that tariffs on Mexican imports being proposed by the Trump administration could increase auto-parts costs by over $1 billion.

In a letter sent to dealers and viewed by Bloomberg, the Japanese car manufacturer said tariffs could increase expenses among its major suppliers by between $215 million and $1.07 billion. Toyota believes tariffs on Mexican goods could have a particularly detrimental impact on the Tacoma pickup truck because 65 per cent of them sold in the U.S. are imported from Mexico.

Toyota builds some Tacomas at a factory in San Antonio, Texas but the majority are built in Tijuana, Mexico. Toyota planned to deliver approximately 246,000 Tacomas this year.

Also Read: Trump Announces 5% Tariff On All Goods From Mexico, Including Cars

The letter came from Toyota executive vice president for North America Bob Carter and added that the proposed tariffs will have an effect industry-wide, noting that General Motors is the largest automotive importer from Mexico.

President Donald Trump says he will apply tariffs of 5 per cent on all Mexican goods imported into the United States on June 10 if Mexico is unable to halt the ongoing flow of illegal immigration. These tariffs could ramp up in increments to 25 per cent by October.

Consultancy LMC Automotive believes tariffs could have a detrimental impact on the economies of Mexico and the United States, potentially cutting new vehicles sales in the U.S. by up to 1.5 million units annually.

“A prolonged period of tariffs on Mexican imports would likely push Mexico into recession and could also threaten a recession in the United States,” LMC said.

Prices of vehicles imported from Mexico could increase by an average of $8500, LMC asserts.