After a year of tariffs, automakers are still resistant to moving production to the US

Automakers Hold Steady on US Production 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 manufacturing operations from Mexico into the United States. The Japanese manufacturer plans to construct half of its highly popular midsize Tacoma pickup trucks at a facility in San Antonio that is undergoing expansion. This location already produces the Tundra full-size pickup and the Sequoia sport utility vehicle. However, Toyota will maintain some Tacoma production in Mexico as well.

President Donald Trump celebrated the announcement, describing it as “a really big deal” and evidence that “Tariffs at work!” are achieving their intended purpose. Despite the timing, Toyota clarified that tariff policy was not the primary driver behind this decision. “While we are impacted by evolving trade policies, our investments are multi-decade decisions based on broader strategic goals,” the corporation explained to CNN.

The Exception Rather Than the Rule

More than twelve months following the Trump administration’s announcement of comprehensive automotive tariffs designed to encourage new American factory construction, Toyota’s action stands out as unusual. Very few car manufacturers have revealed intentions to relocate manufacturing to US soil. Most prefer paying tariff fees rather than committing billions of dollars toward building new facilities—and the product lines heading to America are typically moving into already-established factories.

According to Mobility Global, forty-six percent of automobiles purchased by American consumers during the previous year were imported, representing only a marginal decline from forty-seven point seven percent in 2024. Part of that reduction occurred because manufacturers reduced sales of imported vehicles with more affordable price points, including the Nissan Versa. Nevertheless, numerous expenses and considerable uncertainty prevent automakers from implementing widespread modifications to their manufacturing locations.

“It’s a huge commitment (to build a factory) and to do it on a whim would be borderline crazy,” remarked Ivan Drury, who serves as director of insights at the Edmunds car purchasing platform. “So the safest action is no action. Continue on, even with that increased (tariff) cost.”

Trade Agreement Uncertainty Adds Complexity

One mechanism through which manufacturers maintain lower expenses involves the US-Mexico-Canada Agreement, commonly known as USMCA, the trade pact established during Trump’s initial presidency. This agreement faces renegotiation, and Trump indicated last month that he might abandon it if significant modifications benefiting American corporations do not materialize. Such potential changes alarm automakers who have grown accustomed to parts moving seamlessly across borders with 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,” stated the American Automakers Policy Council, an industry organization representing General Motors, Ford, and Stellantis.

Tariffs are significantly affecting corporate profitability. Toyota remitted $8.4 billion in duties during its latest 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 paid $1 billion.

Existing Facilities Receive New Production

However, tariffs have not entirely failed to motivate companies to return production to American shores. Alongside the Toyota Tacoma initiative, General Motors announced last year that it would relocate assembly of two sport utility vehicles from Mexico. The company will also cease importing a Buick SUV from China, opting instead to manufacture a substitute model domestically. These vehicles will be produced at an existing Kansas facility and another Tennessee plant—locations that had available capacity following GM’s reduction in substantial electric vehicle investments after Trump and Republican congressional members eliminated federal support for electric vehicles.

For Toyota, additional commercial considerations beyond trade regulations explain the San Antonio expansion, according to Patrick Anderson, a Michigan-based economist specializing in the automotive sector. “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 noted. “So it makes natural business sense to consolidate existing operations.”

Even with elevated tariff levels, relocating production based on trade regulations that can change more rapidly than factory construction timelines does not prove logical for most manufacturers. Industry specialists estimate that automakers would require several years and billions of dollars to construct sufficient new American plants or enlarge current ones to substitute imported vehicles—particularly when future administrations could readily undo Trump’s policies. American labor expenses also exceed those in Mexico and certain other nations. Meanwhile, consumer demand remains robust; total vehicle sales increased by two percent during the previous year despite historically elevated automobile prices, encouraging manufacturers to maintain steady import volumes.