I am all for bringing our manufacturing back to the states. I justt wonder how many years it will take to get some of this manufacturing up and running in the U.S. and at a comparable / reasonable market price.
Thus I think is a very pertinent question, and one not considered often enough.
Most people think that there's some magic button businesses can press and suddenly change up their entire supply chain, but it's not true. Stuff takes time.
As an interesting case study, Hyundai recently opened a plant in Georgia (state, not country) to manufacture their evs for the us market.
They started planning the project in 2021 in response to the Biden administrations 'green economy' stuff. They broke ground a few months later, and the first car rolled off the line in 2024. That was significantly ahead of schedule.
The Hyundai example also underlines another consideration. The risks of a changing political environment.
Biden was fairly supportive of evs, and Hyundai planned that facility based on projections under his administration. Trump however is rather less supportive of the green agenda, and I expect that Hyundais initial business case is now looking rather less rosy. But they've already spent all the money, the plant is operational. Sunk costs are sunk, and now they have to deal with a crappy roi. I expect that even under the initial business case, the plant wouldn't pay for itself until 2030 or so.
So tariffs.
if Toyota responds to tariffs by onshoring lexus car production, we might expect the first us made lexus to roll off the line in 2027 or so. It might be as late as 2030. In the interim, us consumers simply have to pay more for japanese made lexuses.
For Toyota to do that, they also need to be very confident that tariffs are here to stay. Not just through this term, but through the next term, and probably the one after. That's the time horizon to recoup the investment after all.
If I was a Toyota exec, I wouldn't be very confident in that. Trump is mercurial and changes his mind constantly. I have no idea if this is bluster or policy. I have no idea if the next candidate will be an r or a d, and even if they are an r, will they promote Trumps agenda? As such, there is an enormous risk premium to that enormous investment. That might be enough for me to simply stick with japan, eat what tariff cost i can, and pass the rest onto the consumer.
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