Toyota warns that Mexico tariffs could raise costs by US$1b

[NEW YORK] Toyota Motor is warning its US dealers the Trump administration's proposed tariffs on Mexican imports could increase auto-parts costs by more than US$1 billion and hurt sales of its top-selling truck.

President Donald Trump's threat to impose tariffs on Mexican goods may boost expenses by US$215 million to US$1.07 billion, the Japanese automaker told dealers in a letter seen by Bloomberg. The mid-sized Tacoma could suffer because 65 per cent of the pickups sold in the US are imported from Mexico, the memo said.

Toyota planned to deliver 246,000 Tacoma models this year, including 160,000 assembled in Tijuana, Mexico, it said. The remainder are produced at a factory in San Antonio, Texas.

In a pair of tweets on May 30, Mr Trump warned of tariffs ranging from 5 per cent starting June 10 that could ramp up in increments to 25 per cent in October unless Mexico's government stops immigrants from entering the US illegally.

ROUGH ESTIMATES

Bob Carter, Toyota's executive vice-president for North America, sent the letter to US dealers late on Monday, saying the added cost projections are "rough estimates" and the full implications for the auto industry remain unclear.

"This is not just an issue for our company. These tariffs will have an effect industry-wide," Mr Carter said in the letter, which noted General Motors is the largest automotive importer from Mexico. He also said Toyota remains hopeful negotiations between the US and Mexico on trade and immigration policy will lead to a deal that can be "resolved quickly."

News of the letter was first reported earlier Tuesday by Reuters.

The notice to dealers comes as Toyota has taken an unusually public stand against the White House's trade policy, saying last month that threatened tariffs against auto and car parts from Japan sent a message to the company that its billions of dollars of investments in the US aren't welcome.

Those shifts in US trade policy were flagged as a key risk in Toyota Motor Credit Corp's annual 10-K report filed on Tuesday.

''Our business is substantially dependent upon the sale of Toyota and Lexus vehicles in the US Changes in the volume of sales may result from governmental action or changes in governmental regulation or trade policies,'' including ''changes in import fees or tariffs on raw materials or imported vehicles,'' the Toyota financial unit said in its filing.

BLOOMBERG