One motive for Toyota and Mazda to build more cars here are tougher fuel-efficiency standards that require the industry to meet a fleet average of at least 54.5 miles per gallon by 2025. | Kazhuhiro/Getty Images The real reasons behind the Toyota and Mazda announcement of a new U.S. factory The new NAFTA talks may have partly motivated the automakers, but it doesn’t mean jobs are being moved from overseas to here.

Japanese automakers Toyota and Mazda earned a lot of political capital from President Donald Trump on Friday after they announced plans to build a new $1.6 billion joint production facility in the United States, creating as many as 4,000 new jobs.

"A great investment in American manufacturing!," an ebullient Trump wrote on Twitter, in response to the news.


But the decision may have been driven in part by other policy factors — such as rising U.S. fuel economy standards and generous local incentives — even as Trump threatens to tighten automotive trade rules under NAFTA and impose duties on imports, analysts said.

Trump won election last year promising to bring manufacturing jobs back to the United States, including by renegotiating NAFTA and promising to slap a border tax on any imported goods. Although he has backed off the latter threat, talks on renegotiating the quarter-century-old North American free trade deal begin in Washington in less than two weeks.

One issue high on the Trump administration's agenda in the NAFTA talks is tightening the automotive "rules of origin" to make sure that North American auto companies and auto-part manufacturers get most of the benefits under the pact, as opposed to suppliers from Asia or Europe.

Union groups such as the United Auto Workers and United Steelworkers strongly favor that change, but both U.S. and foreign-brand automakers that build cars in the United States are opposed, fearing it will disrupt supply chains and raise costs.

It's unlikely that concern alone would have been enough to convince Toyota and Mazda that they needed to announce plans for the new facility, said Caroline Freund, a senior fellow at the Peterson Institute for International Economics. But the announcement buys them a lot of goodwill and influence over the Trump administration and its trade agenda.

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So far, the companies have not announced where they will build the plant, potentially creating a bidding war among states eager for high-paying jobs at a time when U.S. auto demand appears to have plateaued and possibly started a long-term decline.

The announcement is also not a clear vindication of Trump's strategy of making trade policy via Twitter. In January, Trump threatened big taxes if Toyota built a new plant in Mexico.

But on Friday, Toyota said it would continue its construction plans in central Mexico, but the company will make the very popular Tacoma pickup truck there instead of the Corolla, which is in the declining compact-car segment. "There will be no substantial impact on Toyota's investment and employment plan" in Guanajuato, Mexico, as a result of the alliance with Mazda, Toyota said in its statement.

Building vehicles in Mexico also has advantages because it has duty-free access to more overseas markets through its extensive network of free trade agreements.

In addition to building cars together, Toyota and Mazda also agreed to jointly develop technologies for electric vehicles and "connected cars" with internet access.

In that regard, it makes sense to put the plant in the United States to be close to high-tech companies that produce cutting edge technology for cars, Freund said. "There's also this crazy competition that's going on with states to get investment that makes it really cheap for companies to invest since they get all kinds of welcome gifts when they arrive."

Toyota, which has 10 plants in eight states, already has a track record of supporting U.S. jobs, and the company insists that politics had no role.

"The main reason for making U.S. investments is because it makes good business sense," said a Toyota spokesman. "As our Global President Akio Toyoda recently said, we are always thinking about boosting U.S. production, regardless of the political situation in the country."

For Mazda, the venture is a chance to re-establish a U.S. production presence it last had in 2012, when it stopped manufacturing cars with Ford in Michigan, Freund added.

One motive for Toyota and Mazda to build more cars here are tougher fuel-efficiency standards that require the industry to meet a fleet average of at least 54.5 miles per gallon by 2025.

There is a "two-fleet rule" that calculates the fuel efficiency levels for cars manufactured in the United States separately from those that are imported. Building electric cars in the United States would help Toyota and Mazda meet both the U.S. fuel efficiency standard for their domestic fleets and an even tougher California standard, said Kristin Dziczek, director of the industry, labor and economics group at the Center for Automotive Research in Ann Arbor, Mich.

Trump has also threatened to slap tariffs on steel and aluminum imports in the name of national security, causing concerns throughout the auto industry. But if anything, that would be an incentive to build new production facilities outside of the United States since those duties would increase costs, Dziczek said.

In recent weeks, Congress has dropped plans for a border adjustment tax that would have greatly increased the cost of imported vehicles. But Republicans are still pushing tax reform, and uncertainty over how that will turn out could have been a factor in Toyota and Mazda's decision to go ahead with a plant in the United States, she added.

"It's a little surprising to see added capacity when we're at or near the top of the market," but it most likely will displace imports rather than grab market share away from other U.S.-based production, Dziczek said.