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Toyota raises US investment by $3bn as tariffs loom

Automaker's expansion plan through 2021 adds capacity across five states

Tacoma pickups at a Toyota dealership in Colorado. New trade rules will require a car or truck sold in North America to have 75% of its content procured in the region -- the U.S., Canada and Mexico -- to avoid tariffs of up to 25%.   © AP

NAGOYA, Japan -- Toyota Motor plans to invest nearly $13 billion in the U.S. over the five years through 2021, $3 billion more than previously pledged, as it boosts production there in a nod to President Donald Trump's push to boost American manufacturing.

The Japanese automaker is pouring $750 million into facilities across five U.S. states as part of the plan, announced Thursday U.S. time, in a bid to produce more components and hybrid vehicles in the country to avoid tariffs of up to 25% under the revised North American Free Trade Agreement.

The new trade rules, expected to take effect as early as next year, require a car or truck sold in North America to have 75% of its content procured from within the region -- the U.S., Canada and Mexico -- in order to be exempt from tariffs. Toyota wants to boost production in the U.S. to keep its vehicles competitive in one of the world's biggest auto markets.

Specifically, Toyota will add the Lexus ES 300 Hybrid and the RAV4 Hybrid to the production lineup at its Kentucky plant, as well as increase output capacity for engines and other auto parts in Alabama, Missouri, Tennessee and West Virginia. This will help create nearly 600 new jobs, according to the company.

"These investments represent even more examples of our long-term commitment to build where we sell," said Jim Lentz, CEO of Toyota's North America unit.

"Congratulations Toyota! BIG NEWS for U.S. Auto Workers!," Trump tweeted on Thursday.

Toyota President Akio Toyoda will speak in Washington on Friday to outline the company's plans to contribute to the U.S. economy. Toyota sold about 2.43 million vehicles in the U.S. in 2018, amounting to a quarter of its global tally. High-margin SUVs, pickup trucks and the luxury Lexus models are particularly popular in the market.

Trump has been pushing the automaker to boost its presence in the U.S. since before he took office. In January 2017, he responded to plans for its new plant in Mexico saying: "NO WAY! Build plant in U.S. or pay big border tax." Toyota announced its $10 billion investment target shortly afterward.

The company has since been focusing more on the country, including through a $1.6 billion joint plant in Alabama with compatriot Mazda Motor slated for operation in 2021. The latest investment is believed to bring the total since January 2017 up to about $5 billion.

The move is also part of a greater shift toward producing in the U.S. for that market. In 1980, Toyota shipped 99% of all vehicles sold in the U.S. from Japan, then 66% in 1990 and 28% in 2018. But the automaker still exported about 690,000 units from Japan to the U.S., 40% of the total for all Japanese automakers.

The focus is now on the terms of the trade agreement on goods that Japan and the U.S. will start negotiating as soon as April. Many automakers are reevaluating their supply chains and what models to produce in response to protectionist policies by the Trump administration.

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