Isolationism: A Trend in Solitary Confinement?
Britain chose to exit the EU, Donald Trump was elected US President & Marine Le Pen’s loss let down 44% of the French electorate. These results were a result of a large cross-section of society feeling left out of the mainstream of economic progress and capital formation. An anti-establishment sentiment was triggered, and populist political figures rose to the fore.
Globalization and its Discontents 
Globalisation has had a transformational effect on the world economy by creating jobs, lifting millions out of poverty and providing consumers better goods at lower prices.
But the picture is not all rosy. The biggest problem for developed countries is the loss of jobs that are transferred to low-cost economies. According to Robert Scott of the Economic Policy Institute, for the US, China’s most favored nation status drained 3.2 million jobs, and the trade deficits with Japan and Mexico cost 896,000 jobs and 682,900 jobs respectively. 
Political Bosses Push the Brakes
On 5th January 2017, President-elect Trump threatened Toyota with a mega-border tax if they built a new plant in Mexico to manufacture cars for the US. The tweet sent Toyota’s stock crashing, losing 5% ($1.5 bn) of value in under 24 hours. While the stock has since recovered, there’s a larger lesson in the exercise.
With governments pushing for greater investment and job creation in their own country, global corporations like Toyota face the prospect of having their businesses hit by economic tools like trade tariffs and barriers.
Additionally, once-impoverished nations like India, China and Indonesia – now economic powers – expect corporations like Toyota to build locally, teach local workers new skills and share technological know-how. 
Toyota has manufacturing operations in 28 countries, while its vehicles are sold in over 170 countries . It is commercially and technically unviable for it to manufacture locally for every market. Setting up shop in a new location is complex, requiring facilities to build plants, cheap labor, seamless flow of raw materials and output, and favorable tax conditions.
Not Pulling The Andon Cord Yet
Toyota’s manufacturing process is well known for immediately addressing assembly line challenges, but its management is yet to push the panic button. The Japanese automaker issued a statement stating that the new Mexican plant would have no impact on US production or employment, and that the company would continue investing in the US. 
Recognizing the enormity of the threat, Toyota has gone out of its way to win favor with the new administration. Toyota President Akio Toyoda went on record to say that he looked forward to working with the Trump administration, following up with a meeting with VP-elect Mike Pence.
The Japanese government too has stepped in. Prime Minister Shinzo Abe’s cabinet secretary was quoted saying, “Toyota has tried to be a good corporate citizen in the US”. Mr, Abe also had a one-on-one meeting with the Mr. Toyoda prior to his official visit to the White House.
Clearly, Toyota is focused on strengthening its relationships with governments in key markets. Mr. Toyoda has been in dialogue with other heads of state, like Indian Prime Minister Modi, whom he met earlier this year to commit to the ‘Make In India’ program through a Toyota-Suzuki business partnership.
Toyota is undertaking a wise strategy. By deepening its ties with key governments, it betters its odds of minimizing the loss of short-term investments already underway. Simultaneously, Toyota can bolster future partnerships and negotiate sweet deals in return for enabling political leaders fulfill their economic agenda.
This is easier said than done. Building trusting relationships with governments requires sustained dialogue. Mr. Toyoda would need to regularly engage with them, but also empower local management to work closely with the government and take critical decisions that align stakeholder interests when possible. This will ensure that the relationship is not confined to the annual prodigal meeting. We have seen this strategy used by CEOs of large tech companies (Apple, Microsoft, Oracle) as they look to tap high-potential markets.
Elections today are won on the plank of job creation and economic growth. Political leaders need the private sector to deliver on this, and this is where the opportunity for Toyota arises. If it can find ways to boost production in high-growth economies, Toyota will be in a position to negotiate profitable exemptions and tax holidays. It would also provide a cushion against volatility in smaller markets.
Up for Debate: Quick Zip or a Long Drive?
Unlike climate change or digitalization, trade barriers are created and reversed by the stroke of a pen. This begs a couple of key strategic decisions:
- Populist leaders will find it hard to go back on their election manifestos and return to free trade. How does Toyota’s strategy change if isolationism does indeed become the new normal?
2. How can Toyota use its global influence to turn the current political atmosphere into an opportunity, negotiating manufacturing terms that are even more profitable than the status quo?
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 Title of book by Joseph Stiglitz. The book, however, focuses on the harm globalization does in developing countries