Northwest Arkansas Democrat-Gazette
Tarriffs may cause car prices to rise
Chris Reynolds was promoted by Toyota late last year to one of the toughest jobs in the U.S. auto industry. He’s in charge of North American manufacturing, as well as human resources, legal, finance and communications.
He will have to navigate uncertain U.S. trade policies including tariff threats and possible replacement of the North American Free Trade Agreement with Canada and Mexico. Toyota produces vehicles in both countries for sale in the U.S.
Reynolds, the son of a Ford factory worker who grew up in Detroit, spoke with The Associated Press.
The U.S.-Mexico-Canada Agreement, which replaces the North American Free Trade Agreement, is still up in the air. Twenty-five percent tariffs on imported vehicles and parts also are on the table. How does the new agreement and potential tariffs affect Toyota?
We think that the recently negotiated USMCA, if it’s approved, and we’re optimistic that it will be, will actually allow us to flex our production in order to build as much as we can here. We’re looking to do that regardless of the tariff situation. We can’t make moves simply because of the tariff situation. The real litmus test for us in terms of local investment is can we be competitive in building what we sell here? That’s the lens through which we would view whether we would open up a new plant or not, or what additional investments we might make.
President Trump has threatened to pull out of NAFTA if Congress doesn’t approve its replacement. What would that do to Toyota?
When you assemble a vehicle in one state, but the parts can literally crisscross the border five or six times before it actually gets assembled to the vehicle, it’s very challenging to think of an outcome where the border actually becomes a barrier to our whole assembly process, our whole supply chain. That’s not just true of Toyota, it’s true of every automaker. So there’s common industry interest in making sure that there are as few barriers as possible.
If the U.S. imposes 25 percent tariffs on imported vehicles and parts, Toyota has said there would be significant price increases for vehicles built in the U.S. The price of the Camry midsize car, which has among the highest U.S. parts content, would rise by $1,800. Why would the Camry price go up?
There’s no 100 percent U.S.-made product. Every vehicle from every manufacturer has some amount of componentry that comes from somewhere else. We’ve got to be able to absorb those costs. And where we can’t absorb them, what tariffs do to you is they compel us and every other manufacturer to pass those costs on. Let’s not forget the steel and aluminum tariffs. They also have an impact, and not a positive one. So that’s why you’re seeing the risk on price even for a vehicle like a Camry.