In just two months, Toyota Motor Corp. anticipates that U.S. tariffs imposed by former President Donald Trump will reduce its operating income by ¥180 billion ($1.3 billion), adding to the difficulties faced by international automakers navigating trade turbulence.
Toyota profit hit by tariffs to $1.3 billion after tariffs
On Thursday, Toyota disclosed that its projections have already carefully considered the financial setbacks from April and May. However, Toyota did admit that continued uncertainty might make its outlook for the fiscal year even more precarious. For the year ending March 31, 2026, the automaker now projects an operating income of ¥3.8 trillion, much less than the ¥4.7 trillion analysts had predicted.
Toyota reported operating profits of ¥4.8 trillion for its most recent fiscal year, which is less than the record-breaking ¥5.35 trillion made in 2024, which set a high bar for Japanese companies. Profits increased by just 0.3% to ¥1.1 trillion in the fourth quarter, indicating only modest growth. Koji Sato, the chief executive officer, stated that it is challenging to formulate a definitive response due to the uncertainty surrounding tariffs. To reduce trade risk, he continued, saying that Toyota is looking into longer-term local production and research and development expansion in the United States.
In Tokyo, Toyota shares ended the day down 1.3% after initially rising after its earnings announcement. The stock has dropped about 15% so far this year. Toyota warns investors about the financial burden of rising tariffs, joining other big players like General Motors, Ford, and Stellantis. Due to anticipated losses from duties on imported cars and parts, some manufacturers have completely withdrawn their financial guidance, while others have drastically reduced their projections.
Trump and the US market
Trump recently issued a directive that provided short-term respite by exempting imported automobiles from steel and aluminum tariffs and permitting some automakers to claim partial offsets on U.S.-built vehicles. However, operations are still being hampered by the larger 25% tariff on imported auto parts that went into effect on May 3.
With roughly 23% of Toyota’s global sales last year, the U.S. market is still vital for Japanese automakers. March saw a spike in consumer demand as consumers scrambled to avoid possible price increases brought on by the tariffs.
Toyota wants to boost global sales from 11 million to 11.2 million units this fiscal year despite short-term challenges. Last year, 46% of all sales were of electric vehicles (EVs) and hybrids. Citing shifting market conditions, Sato retracted his earlier target of selling 1.5 million battery EVs by 2026.
Investors are monitoring Chairman Akio Toyoda’s planned ¥6 trillion acquisition of Toyota Industries Corp., which has the potential to rank among the biggest corporate buyouts in history.
Featured Image Credit: Erik Mclean; Pexels: Thank You!
