Toyota's Profit Plunge Forecast Amid Trump's Car Tariffs
Get ready for some grim financial news from the auto world!
Toyota anticipates a 35% decline in net profit for the years 2025-26, attributing the setback to escalating tariffs.
Japan's car titan, Toyota, has announced a whopping 35% drop in net profit for the 2025-26 fiscal year. And guess who's to blame? None other than former President Trump and his vehicle tariffs.
Carmakers have been taking a beating courtesy of Trump's trade war tactics, and Toyota is no exception.
Back in 2025, the Trump administration added a 25% duty on imported cars, and, to make matters worse, they slapped similar tariffs on auto parts like engines and transmissions.
For their current financial year, which began in April, Toyota is now expecting a net profit of 3.1 trillion yen ($21.6 billion).
The company's statement admits that the estimated influence of U.S. tariffs in April and May of 2025 has been accounted for in their forecast.
In the 12 months leading up to March, Toyota managed to log a net profit of nearly 4.8 trillion yen, dropping 3.6% year-on-year, but still managing to beat their forecast from February.
As of this month, Toyota estimates that the tariffs will impact their 2025-2026 operating profit to the tune of 180 billion yen.
Bloomberg Intelligence auto analyst Tatsuo Yoshida stated that Toyota's forecasts are under intense scrutiny in Japan. "I reckon Toyota will find a way to gauge the impact of tariffs and reflect it in their forecast," he told AFP before the earnings report. "It would leave the whole nation, including suppliers, in the lurch if Toyota doesn't issue some sort of benchmark."
Vehicles accounted for about 28% of Japan's exports to the United States the previous year.
Trump recently attempted to soften the blow of his automaker tariffs by signing an executive order to cap the impact of overlapping levies on businesses.
Under Trump's new policy, a company would face the higher of the 25% tariff for an imported vehicle or the 25% tariff on steel or aluminum, but not both, according to a U.S. commerce official. The president also granted the industry a two-year grace period to relocate supply chains to the United States.
Toyota sold a staggering 10.8 million vehicles worldwide in 2024, retaining its status as the world's top-selling automaker.
Takaki Nakanishi of auto sector consulting firm Nakanishi Research Institute said it's tricky to predict the exact impact of U.S. tariffs on car companies' earnings. "Automakers are striving to move production to the United States, but change takes time," he noted.
Trump vented his frustration last month over the gaping disparity between Japanese car exports to the United States and exports in the opposite direction. "They don't sell our cars, but we sell millions of theirs!" he alleged in April, accusing Japan of ill treatment on trade.
Toyota is the second-largest automaker in the United States, having shifted more than 2.3 million vehicles there in 2024, while the U.S. industry leader General Motors only managed to sell 587 Chevrolets and 449 Cadillacs in Japan. Ford exited the tough Japanese market nearly a decade ago.
- Toyota, a Japanese car giant, forecasts a 35% drop in net profit for the 2025-26 fiscal year due to former President Trump's car tariffs.
- The Trump administration imposed a 25% duty on imported cars in 2025, and similar tariffs on auto parts, causing major distress in the auto industry.
- For their current financial year, Toyota expects a net profit of 3.1 trillion yen ($21.6 billion), a significant decline from the previous year's earnings.
- Trump's automaker tariffs have left the industry, including Japan and Toyota's suppliers, in a precarious position.
- In the 12 months leading up to March, Toyota still managed to beat their forecast from February despite a 3.6% year-on-year drop in net profit.
- Toyota estimates that the tariffs will impact their 2025-2026 operating profit to the tune of 180 billion yen.
- Analyst Tatsuo Yoshida has expressed concern about the potential ripple effects of Toyota's forecast on Japan's auto sector, particularly its suppliers.
- Despite the challenges posed by the tariffs, Toyota continues to lead the global auto market, selling over 10.8 million vehicles worldwide in 2024.
