TOKYO—

Toyota Motor
Corp.


TM 0.10%

said Wednesday that its exports to the U.S. rose 22% in April, highlighting the problem it faces if the Trump administration makes good on threats to impose higher tariffs on imports.

The problem is crystallized in one model: the RAV4 sport-utility vehicle. It is the most popular Toyota among American consumers—and none are made in the U.S. More than half are imported from Japan, while the rest are made in Canada and imported tariff-free under the North American Free Trade Agreement.

Earlier this month, the Trump administration said it was considering a plan that would impose higher tariffs on cars and car parts, citing national-security concerns, with possible tariffs of up to 25% on automobile imports.

Toyota stands to lose the most because of its size and exposure to the U.S. market.

In April, Toyota exported 66,000 cars from Japan to the U.S., a 22% increase over the same month a year earlier. Many of them were RAV4s, Toyota’s best-selling entry in the increasingly popular category of crossover SUVs that combine the space of an SUV with fuel efficiency rivaling sedans.

The increased space comes at only a small premium. The RAV4 starts at $24,500 in the U.S., compared with $23,500 for the Camry sedan.

Toyota has faced pressure from U.S. politicians for decades over its exports from Japan, and has responded by investing billions of dollars in U.S. factories. So why isn’t it building its most popular vehicle there?

Poor timing is partly to blame. The company is in the middle of a $10 billion U.S. investment plan that is heavily weighted toward boosting sedan production—including a $1.3 billion upgrade to its Kentucky factory to produce the latest version of the Camry and an $800 million plan for a new factory in Alabama that will produce around 150,000 Corollas a year starting in 2021.

Toyota made the plan when the U.S. market was split 50-50 between cars and trucks, including SUVs. Today, trucks and SUVs make up closer to two-thirds of the market.

The company does have a plan to make more RAV4s close to the American market next year. But that plan could be problematic too, if Mr. Trump is serious about his threats.

Toyota is spending nearly $1 billion to upgrade its plants in Canada to double RAV4 production to around 400,000 a year. By the early 2020s, that means the U.S. hunger for RAVs could be met almost entirely within North America—but only if the Nafta deal allowing tariff-free imports from Canada survives the Trump administration.

“Our production strategy has been based on Nafta, and that’s how we have planned the production structure, including deciding which models to produce at which plants,” a Toyota spokesman said.

Nafta is being renegotiated by the U.S. and the other two members, Canada and Mexico. Mr. Trump has said he is ready to end the agreement if it isn’t revised to his satisfaction.

Toyota technically could produce at least some RAV4s in Kentucky, since the Camry and RAV4 share a common architecture. It isn’t likely to do that, however, because it would create waste, something that is anathema to Toyota’s production engineers. Upgrading the Kentucky plant would result in unneeded RAV4 capacity once the Canadian expansion is finished.

“These guys, Toyota production system people, they are the most powerful and influential people in Toyota. They are focusing on cutting waste and increasing efficiency,” said

Takaki Nakanishi,

an auto analyst who runs Nakanishi Research Institute in Tokyo.

Toyota used to produce some RAV4s in Mississippi, but stopped doing that so it could centralize North American production of the vehicle in Canada. That saves costs in part by simplifying the supplier base.

Toyota has previously moved to appease Mr. Trump after facing criticism for investments outside the U.S. The company originally planned to build a new Corolla factory in Mexico, then switched to Alabama after Mr. Trump tweeted “NO WAY!” The Mexico factory will make trucks instead.

Asked why Toyota didn’t move its truck and SUV production to the U.S. from Mexico and Canada, respectively, the spokesman said the company’s production strategy has been based on Nafta, under which trade among the three countries is free.

Write to Sean McLain at sean.mclain@wsj.com



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