Toyota spokesman Scott Vazin said the company would continue to make the Corolla at its MS manufacturing plant, as well, with no changes planned there. It is expected to produce the Toyota Corolla and a Mazda SUV.
The companies will begin to examine detailed plans with the goal of starting operations at the new plant in 2021.
Toyota had meant to move Corolla production to a new plant in Mexico from the current site in Canada.
Instead it will produce Tacoma pickups there, Toyota President Akio Toyoda said.
Trump had previously criticized Toyota for taking auto production and jobs to Mexico.
Trump welcomed the announcement of the United States factory, calling it "a great investment in American manufacturing". "A great investment in American manufacturing!". In recent years, Japanese auto makers have shifted more manufacturing to North America to be closer to the USA market and reduce exposure to currency fluctuations. Corolla sales fell 10 percent through July. If not, the plant will have the flexibility to shift to another model, according to spokesman Scott Vazin. Toyota is buying nearly 32 million newly issued common stock shares to the tune of 50 billion yen (£345m) while Mazda is taking on some of Toyota's treasury stock that's equivalent in value. The stock would be worth an equivalent amount in cash, but because Toyota is much larger than Mazda, Mazda's stake in Toyota would work out to 0.25 percent. Last year, it launched a division to develop full-sized electric vehicles. But recent breakthroughs in batteries allow for longer travel per charge.
Toyota is vying for the spot of No. 1 automaker in global vehicle sales against Nissan-Renault and Volkswagen AG of Germany, as the industry gradually consolidates.
Toyota has been forging alliances with domestic rivals in an effort to boost competitiveness. "It has also sparked Toyota's competitive spirit, increasing our sense of not wanting to be bested by Mazda". The two Japanese automakers, which had been contemplating a possible business alliance, judged it necessary to strengthen their partnership.
Mazda will gain from this deal that allows the smaller automaker a foothold in production in the USA, as it now ships every vehicle sold in the U.S.to that country, its largest market, from Mexico and Japan. Hiroshima-based Mazda has no plants in the US.
By producing vehicles in the U.S., Mazda aims to build a production structure to further grow in North America.
Subaru's sales gains contrasted with the 5.7 percent drop in North American sales at Japan's No.3 automaker Honda Motor and a 6.0 percent fall at Mazda Motor Corp. Although, Ford cut its stake in Mazda in 2008.
Toyota Motor Corp raised its full-year profit forecast by 16 percent on Friday, citing expectations of a weaker yen, after posting a smaller-than-expected drop in quarterly profit.