ANKARA

Japanese giant Toyota Motor Corporation on Tuesday inked a $2 billion agreement to establish a wholly-owned electric vehicle (EV) plant in Shanghai amid an escalating US tariff war, particularly targeting China, state media reported.

The world's top-selling automaker signed the agreement with the Shanghai municipal government in a strategic move to bolster its presence in China, the world's largest automotive market, Beijing-based Xinhua News reported.

According to the deal, Toyota commits to invest a total of 14.6 billion yuan (about $2 billion) in the new energy vehicle (NEV) project in Jinshan district, which focuses on the research and development, production, and sales of Lexus EVs and EV batteries.

The development came a week after Honda Motor announced plans to relocate some of its domestic production to the United States as Japan seeks to avoid 24% tariffs imposed by the Trump administration.

The tariffs will have a particular impact on car, steel, and aluminum sales, as Tokyo is currently negotiating with Washington after the US president granted a 90-day reprieve to all nations except China hit by his broad tariffs.

The project will introduce groundbreaking technologies to create a leading carbon neutrality model project that will have a significant influence both in China and globally, the media outlet cited Tatsuro Ueda, chief executive officer of China Region and chairman of Toyota Motor (China) Investment, as saying.

It is another globally significant NEV project in Shanghai following Tesla's Shanghai Gigafactory.

Construction is set to begin in June, with production starting in 2027.

Although Toyota did not reveal the production capacity on Tuesday, it said in February that the initial production capacity would be around 100,000 units per year, with the project expected to generate approximately 1,000 new jobs during the start-up phase.

China faces tariffs of up to 245% on imports to the United States, while Beijing has raised its tariffs on US goods to 125%.