Toyota Explores UK Exports to US to Dodge Trump Tariff Hikes

Strategic Shift Amid Trade Policy Changes

Toyota Motor Corporation (NYSE:TM), the global automotive giant, is reportedly evaluating the possibility of exporting vehicles from its United Kingdom manufacturing plants to the United States as a tactical move to sidestep escalating trade tariffs introduced by President Donald Trump. According to insights from the Financial Times, this potential shift stems from comments by Matt Harrison, Toyota's chief corporate officer in Europe, who emphasized the company's intent to explore every viable option to counter growing trade and political pressures. With Trump's administration rolling out aggressive tariff policies targeting major US trading partners, Toyota aims to safeguard its market position by leveraging its UK facilities, though the strategy comes with notable challenges and limitations.

The backdrop to this decision involves Toyota's extensive production network and the specific tariff threats posed by Trump's policies. In 2024, Toyota manufactured approximately 9.5 million vehicles worldwide, with its UK plants contributing a modest 98,000 units, primarily hybrid Corolla Hatchback and Corolla Touring Sport models tailored for European consumers. Meanwhile, North American operations dwarf this figure, with US plants producing 1.2 million vehicles, Canadian facilities outputting 533,000 units, and Mexican factories adding 245,000 units. The bulk of this North American output serves the US market, making Toyota particularly sensitive to tariff hikes on imports from Canada and Mexico, where Trump imposed a 25% tariff in early March 2025. Although a temporary one-month exemption was granted to key sectors like automobiles, the looming threat of reciprocal tariffs, set to take effect on April 2, 2025, adds further complexity. These reciprocal tariffs aim to mirror the rates other nations impose on US goods, potentially impacting Toyota's import costs from multiple regions, including the UK.

Trump's trade agenda has already disrupted the automotive industry, with the 25% tariffs on Canada and Mexico sparking concerns over compliance with the US-Mexico-Canada Agreement (USMCA). The USMCA stipulates that vehicles must contain 75% regional value content to qualify for tariff-free status, a threshold complicated by ongoing disputes over calculation methods between the US, Canada, and Mexico. Should Toyota's Canadian or Mexican production fail to meet these stringent rules, vehicles could face a combined tariff of 27.5%, comprising the standard 2.5% US car tariff plus the additional 25%. In contrast, exporting from the UK might incur a lower rate under reciprocal tariffs. If the UK levies a 10% tariff on US cars, as it does post-Brexit, the US could respond with a matching 10% rate, resulting in a total of 12.5% on UK imports, a significant saving compared to the North American alternative. This potential cost advantage is driving Toyota's exploration of UK exports, even if the volume remains small.

However, the feasibility of this plan hinges on several factors, notably the limited production capacity and market fit of Toyota's UK output. The Burnaston plant in Derbyshire focuses on compact models like the Corolla, which, while popular in Europe for their hybrid efficiency, lack the appeal of larger SUVs and trucks that dominate US consumer preferences. Exporting these vehicles would also require adjustments to meet stringent US safety and emissions standards, potentially increasing production costs and eroding tariff savings. With only 98,000 units produced annually in the UK, compared to millions in North America, the scale of this operation would remain a minor fraction of Toyota's US supply chain. Nevertheless, this move could serve as a strategic hedge, diversifying Toyota's sourcing options amid uncertainties surrounding USMCA compliance and future tariff escalations.

Toyota's resilience in the global automotive market provides context for this adaptability. Despite a worldwide slump in demand and rising competition from electric vehicle manufacturers, Toyota has thrived, largely due to the enduring popularity of its hybrid offerings in North America. Models like the RAV4, produced in Canada, and the Corolla, assembled in Mexico and the US, have bolstered its market share. The company is also poised to expand its electric vehicle portfolio in Europe, signaling a forward-looking approach to emerging trends. Yet, the tariff landscape poses a unique challenge, prompting Toyota to consider unconventional solutions like UK exports. If successful, this could mitigate the financial strain of tariffs on its North American operations, though experts suggest the impact would be limited given the mismatch between UK production and US demand.

The broader implications of this strategy reflect the intricate balance automakers must strike in a volatile trade environment. Trump's reciprocal tariff plan, designed to level the playing field with nations imposing higher duties on US goods, could reshape global supply chains. For Toyota, exporting from the UK might offer a temporary reprieve, particularly if trade relations with Canada and Mexico deteriorate further over USMCA disputes. Still, the logistical hurdles, including retooling plants or establishing new shipping routes, combined with the modest output of UK facilities, suggest this is more of an exploratory measure than a transformative shift. The Financial Times notes that Toyota's leadership remains pragmatic, viewing the UK option as one of many tools to navigate an unpredictable policy landscape.

Ultimately, Toyota's contemplation of UK-to-US exports underscores the broader pressures facing the automotive industry under Trump's trade policies. By leveraging its global manufacturing footprint, Toyota aims to maintain competitiveness, even as tariff threats loom large. While the immediate scope of this plan appears constrained by production volumes and market dynamics, it highlights the company's proactive stance in addressing trade headwinds. As the April 2, 2025, deadline for reciprocal tariffs approaches, Toyota's next steps will likely depend on how these policies unfold and whether the UK can indeed emerge as a viable tariff-avoidance hub for the US market.