President Trump summed up Toyota’s stunning Tacoma pickup truck announcement in three words: “Tariffs at work!” He is absolutely right. And the shortfalls of the U.S.-Mexico-Canada Agreement on trade are part of the story, too.
Toyota is putting $3.6 billion into its San Antonio manufacturing campus, adding 2,000 jobs and expanding by 2.5 million square feet. This expanded Texas plant will add major new Tacoma capacity and shift a major share of U.S.-bound Tacoma production onto American soil, right where it should be.
Strategically, this is very good for America. A robust domestic auto industry with resilient supply chains enhances both national security and economic prosperity.
Cars and trucks are rolling platforms of steel, aluminum, semiconductors, sensors, batteries, magnets, software, and advanced electronics. Whoever controls that supply chain controls jobs, wages, innovation — and, in a crisis, production capacity for America’s arsenal of democracy.
The best situation for America is clear: a U.S.-owned factory, employing American workers, on U.S. soil, drawing from American suppliers. That keeps wages, profits, engineering, tax revenues and strategic decision-making here at home. That is the gold standard.
But a Toyota factory in Texas is still a major improvement over a Toyota assembly line in Mexico operating inside a supply-chain ecosystem where the U.S. Trade Representative says Chinese content is rising. Toyota on U.S. soil still hires American workers, supports American suppliers, pays American taxes, and deepens the American industrial base.
The U.S. Trade Representative’s recent 2026 report to Congress tells the story. USMCA was supposed to replace NAFTA’s hollowing-out model with tougher auto rules, higher regional content, labor value content and stronger North American supply chains. Yet the report concedes this vision “has not been fully realized.”
The numbers are brutal. The U.S. auto and parts deficit with Mexico rose from $91.9 billion in 2019 to roughly $130 billion a year today.
Even worse, U.S. content in vehicles assembled in Mexico and Canada has been in free fall. Industry estimates show U.S.-origin parts content in Mexico-built vehicles collapsing from more than 60 percent in 2017 to 35 percent in 2024.
That is the great USMCA auto leakage. USMCA was supposed to raise American content. Instead, Mexican assembly has increasingly become a staging ground through which Chinese and other third-country content can seep into the American market.
As Beijing strategists have learned, China does not need to ship finished cars directly into U.S. ports to penetrate the U.S. auto market. It can instead ship electronics, batteries, magnets, semiconductors, sensors, displays, and subassemblies into Mexico, where they may be transformed, rolled up, and shipped north inside nominally “North American” vehicles. The more complex the vehicle, the more places for Chinese content to hide.
On July 1, the U.S. declined to renew USMCA in its current form, while keeping the agreement in force as negotiations continue. USMCA’s loopholes and shortfalls in the auto sector, which must be negotiated away, are a big reason why.
That is why Toyota’s Texas move matters. Content laundering that can be hidden inside a Tijuana industrial park is far more difficult — and far costlier — in Bexar County, Texas. A Texas-assembled Tacoma is closer to U.S. suppliers, regulators, customs scrutiny, labor law, and tax jurisdiction.
Toyota has not formally said the Trump tariffs drove the move to America — that is corporate diplomacy. But the numbers speak loudly.
U.S. tariffs reportedly erased Toyota’s North American profits in fiscal 2026, pushing Toyota into a rare $1.9 billion operating loss in the region, while Toyota put the total company-wide tariff impact at roughly $9 billion. A relocation of U.S.-bound production to U.S. soil is one durable way for Toyota to reduce its tariff bill, which it clearly cannot pass on to American consumers.
That is how tariffs work: They change the price signal. They make it less attractive to export American demand to foreign factories and more attractive to build where you sell. And with the Trump tariffs, that is right here in the USA.
Peter Navarro is the White House senior counselor for trade and manufacturing.
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