Case of the Killer Toyotas - WSJ Editorial
China, Cuba, Russia, al Qaeda, Islamic State, the Toyota Motor Corp. , North Korea, Hezbollah, the Islamic Revolutionary Guard Corps. Which one of the above doesn’t belong on a list of national security threats to the United States? If you answered Toyota, you must not work for the Trump Administration, which declared last week that autos or auto parts pose a threat to U.S. national security unless they are “American-owned.” Financial markets were relieved Friday when the White House proclamation offered a 180-day tariff reprieve during trade negotiations with Europe and Japan. But the proclamation’s “American-owned” language is a sour and illogical note that could lead to punishing tariffs or even controls on investment in the U.S.
Mr. Trump’s argument, provided by the Commerce Department, is that “the lag in R&D expenditures by American-owned producers is weakening innovation and, accordingly, threatening to impair our national security.” Therefore, “domestic conditions of competition must be improved by reducing imports.” Never mind that Toyota, Honda, Volkswagen , Mercedes-Benz, Mazda , BMW , Subaru , Nissan, Kia and Hyundai all make or assemble cars and parts in the United States. The nearly 500 facilities are located in multiple American states and directly employ 130,000 Americans. Volvo has a plant in South Carolina that may employ 4,000. By the proclamation’s logic, the only car companies that matter to U.S. security are Ford, GM, Tesla and maybe not even Fiat Chrysler, since Italians are significant owners.
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Toyota has 10 manufacturing plants across eight states, including Alabama, California, Indiana, Kentucky, Mississippi, Missouri, Tennessee and West Virginia. For the political record, Mr. Trump won all those states in 2016 except for California. Do the Governors of those states care to comment on whether all of these jobs and wages are a security threat? Toyota also has a network of 1,500 auto dealers that employ 100,000 Americans, and directly or indirectly through its suppliers Toyota employs a total of 475,000 Americans. Company headquarters is in Japan but Toyota has invested more than $60 billion in the U.S. More than 36 million Toyota and Lexus vehicles are on America’s roads.
As for R&D, Toyota points out that it contributes to American knowhow by “open-sourcing of patents” for the likes of fuel cells and hybrid electrification while continuing to invest in artificial intelligence, autonomous technology and robotics. The only threat any of this poses would be if Toyota gave up on America and moved everything somewhere else. Toyota, Honda and most of these foreign car companies are also publicly traded companies with significant American ownership. U.S. institutional investors hold millions of shares on behalf of millions of Americans. While management control resides in Japan, their business success depends in large part on success in the American market. And their success pays off for American investors.
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https://www.wsj.com/articles/case-of-the-killer-toyotas-11558394076 (paid subscription)