President Trump distilled Toyota's decision to expand Tacoma pickup production in Texas into a three-word verdict: “Tariffs at work!” He's not wrong. But the shortcomings of the USMCA trade deal are equally central to this story.
Toyota is pouring $3.6 billion into its San Antonio campus, adding 2,000 jobs and 2.5 million square feet. The expanded facility will significantly boost Tacoma capacity and relocate a major portion of U.S.-bound assembly from Mexico to American soil.
Strategically, this is a win for the United States. A robust domestic auto industry with resilient supply chains bolsters both national security and economic growth. 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 ideal scenario remains a U.S.-owned factory with American workers, suppliers, and tax revenue. But a Toyota plant in Texas is a major improvement over one in Mexico, where the U.S. Trade Representative reports rising Chinese content. Toyota on U.S. soil hires American workers, supports American suppliers, pays American taxes, and deepens the industrial base.
The U.S. Trade Representative's 2026 report to Congress lays bare the problem. USMCA was designed to replace NAFTA with tougher auto rules, higher regional content, and stronger North American supply chains. Yet the report admits this vision “has not been fully realized.” The numbers are stark: The U.S. auto and parts deficit with Mexico has ballooned from $91.9 billion in 2019 to roughly $130 billion annually. Worse, U.S.-origin parts content in Mexico-built vehicles has collapsed from over 60% in 2017 to 35% in 2024.
This is the great USMCA auto leakage. Instead of boosting American content, Mexican assembly has become a conduit for Chinese and other third-country content to enter the U.S. market. Beijing strategists have learned they don't need to ship finished cars directly to U.S. ports; they can ship electronics, batteries, magnets, semiconductors, and subassemblies into Mexico, where they're rolled into 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, keeping the agreement in force while negotiations continue. The loopholes in the auto sector, which must be negotiated away, are a key reason why. That's why Toyota's Texas move matters: content laundering hidden in a Tijuana industrial park is far harder and costlier in Bexar County, Texas. A Texas-assembled Tacoma is closer to U.S. suppliers, regulators, customs scrutiny, labor law, and tax jurisdiction.
Toyota hasn't formally said Trump's tariffs drove the move—that's corporate diplomacy. But the numbers speak loudly. U.S. tariffs reportedly erased Toyota's North American profits in fiscal 2026, pushing the region into a rare $1.9 billion operating loss, with total company-wide tariff impact around $9 billion. Relocating U.S.-bound production to American soil is a durable way to reduce that tariff bill, which Toyota clearly cannot pass on to consumers.
That's how tariffs work: they change price signals, making it less attractive to export American demand to foreign factories and more attractive to build where you sell. And with the Trump tariffs, that's right here in the USA.
For more on how trade policy is reshaping global alliances, read why U.S. allies are not retaliating against Trump's tariffs. Meanwhile, the political landscape in Texas is shifting; see how Cruz warns Texas GOP that Talarico could flip a Senate seat in a tight race.
Peter Navarro is the White House senior counselor for trade and manufacturing.
