Toyota Says Tariffs Will Erase $1.3 Billion in Profits in Just 2 Months

A year ago, Toyota Motor, the world’s leading automaker, was riding high. U.S. consumers were eagerly purchasing the company’s hybrid vehicles, and a weaker yen significantly boosted Toyota’s earnings. In May, Toyota proudly announced the largest annual profit ever recorded by a Japanese corporation.

However, on Thursday, Toyota presented a much more cautious forecast, predicting that its operating profit for the fiscal year ending in March would drop by roughly 20 percent. The company attributed this decline to the unfavorable impact of a stronger yen and anticipated a financial blow of approximately $1.3 billion from tariffs imposed by the Trump administration in April and May alone.

Toyota’s CEO, Koji Sato, indicated that the projected tariff impact only accounted for those two months, acknowledging that forecasting the longer-term effects of the tariffs remains highly uncertain. “The current landscape in the auto industry, including trade relations, is extraordinarily volatile,” Sato said during a press briefing.

Toyota’s outlook reflects the broader uncertainties faced by the global automotive sector amid President Trump’s tariff policies, which have disrupted supply chains and complicated profit forecasts for many multinational companies. Since early April, a 25 percent tariff on vehicle imports to the U.S. has been extended to cover auto parts as well, further compounding the challenges.

The immediate impact of the tariffs on Toyota underscores the difficult position Japan finds itself in as it negotiates trade terms with the Trump administration. While Trump has delayed the implementation of a blanket 24 percent tariff on Japanese imports until early July, the higher auto tariffs are already affecting Japan’s key export sector. Automobiles and auto parts remain Japan’s top exports to the U.S.

Ryosei Akazawa, Japan’s chief negotiator in the trade talks, recently reported that the new tariffs were costing one Japanese automaker approximately $1 million per hour. Despite these pressing concerns, progress in negotiations has been slow. The U.S. has reportedly indicated that Japan’s primary request for an exemption from the auto tariffs is not currently open for discussion.

After returning from the latest round of trade discussions in Washington, Akazawa stated over the weekend that the two countries had yet to reach a consensus. Prime Minister Shigeru Ishiba called for patience, warning that Japan should not rush into an agreement that could compromise the country’s long-term interests.

Economists and officials are growing increasingly concerned about the broader economic consequences of the tariffs, especially given the central role of the auto industry in Japan’s industrial sector. Last week, the Bank of Japan slashed its economic growth projection by more than half, attributing the downgrade to what it described as an “unprecedented level” of U.S. tariffs.

Toyota’s somber outlook on Thursday hinted at challenging times ahead for the Japanese auto industry as a whole, particularly given that Toyota is considered one of the least exposed among Japan’s automakers to the Trump tariffs.

Out of the 2.3 million vehicles Toyota sells annually in the United States, only about 500,000 are imported from Japan. Despite the anticipated hit to its profits, Toyota still projects that its North American sales will increase by 237,000 units in the current fiscal year.

In contrast, smaller Japanese automakers such as Mazda and Subaru rely more heavily on imports for their U.S. sales, and Mitsubishi Motors, which lacks a manufacturing presence in the United States, may be particularly vulnerable. Japan’s second and third-largest automakers, Honda and Nissan, are expected to announce their earnings next week, potentially providing further insight into the industry’s overall health.

Meanwhile, automakers outside Japan are also bracing for impact. Last week, General Motors cut its 2025 profit forecast by over 20 percent, citing projected cost increases of more than $4 billion due to the Trump tariffs. Several European automakers have also opted to suspend their 2025 financial forecasts, citing the unpredictability of trade relations and tariff policies.