The United States requires that 50 percent of all parts used to construct an automobile in the United States be manufactured in the United States. As a result of this, when Toyota Motor Company builds automobile manufacturing plants in Tennessee and Ohio, it faces economic risks associated with

Question

Quizplus · Accepted Answer

Local-content laws require that a certain percentage of a product's components must be sourced from within the country where the product is being assembled or manufactured. In this case, the requirement that 50 percent of all parts used in constructing an automobile in the United States be manufactured domestically is an example of a local-content law. This poses economic risks for Toyota because it limits their flexibility in sourcing parts, potentially increasing costs if domestic parts are more expensive than those that could be sourced internationally.

The United States Requires That 50 Percent of All Parts