Mazda lacks any USA factories, which exposes one of Japan's smallest carmakers to both trade and currency risk.
President Trump, who vowed to bring manufacturing jobs back to the U.S.in his campaign, praised the announcement in a tweet Friday.
Specifically, the companies agreed to: 1) establish a joint venture that produces vehicles in the United States, 2) jointly develop technologies for electric vehicles, 3) jointly develop connected-car technology, 4) collaborate on advanced safety technologies and 5) expand complementary products.
"Today's agreement is a testament to the positive result of two years of collaborative and deliberate discussions between the two companies, and it is a milestone in the journey to further strengthen and accelerate the partnership in a sustainable way", Toyota and Mazda said in a statement.
Toyota will produce its Corolla model, while Mazda will produce a new crossover at the new facility, according to the Wall Street Journal.
Toyota's Mexico plant will produce its Tacoma truck instead.
Toyota operated a final assembly plant in Fremont, California, with General Motors until the plant closed in 2010 as GM went through a structured bankruptcy. "With the investment", the AP said, "both automakers can hope to prove their good American corporate citizenship and appease the Trump administration's concerns about jobs moving overseas". "Build plant in US or pay big border tax".
Toyota, along with German and Asian automakers, have during the past 30 years built a second auto industry in the United States, rivaling the USA operations of the Detroit Three automakers in size and employment, but with newer, and far less unionized, plants.
Toyota, Japan's biggest carmaker, has been forging alliances with smaller Japanese rivals for several years.
Toyota on the other hand is perfectly placed to enter the EV market, and has already committed to sustainable transport. It is also the top shareholder in Fuji Heavy Industries, the maker of Subaru cars. Toyota and Mazda judged that it is necessary to heighten efficiency through cooperation.
Toyota said it is assuming an average US dollar rate of 110 yen and euro rate of 124 yen for the year, compared to earlier estimates of 105 yen and 115 yen, respectively.