Toyota warns of $9.5 billion tariff hit, slashes annual profit forecast

Japan’s Toyota Motor said on Thursday it expected a hit of nearly $10 billion from President Donald Trump’s tariffs on cars imported into the United States, the highest such estimate yet by any company, underscoring growing margin pressures.

The world’s top-selling car maker also cut by 16 per cent its forecast for full-year operating profit, reflecting challenges for global manufacturers grappling with rising costs from US levies on cars, parts, steel and aluminium.

“It’s honestly very difficult for us to predict what will happen regarding the market environment,” Takanori Azuma, Toyota’s head of finance, told a briefing, vowing to keep making cars for US customers, regardless of tariff impact.

Azuma said the 1.4 trillion yen ($9.50 billion) estimate also includes fallout suppliers are facing, particularly those in the US importing parts from Japan, though he declined to say how much of the total was attributable to that.

Rivals have reported smaller tariff hits so far: GM has projected one of $4 billion to $5 billion for the year, while Ford expects a $3-billion hit to full-year gross revenues.

Jeep maker Stellantis said tariffs were expected to add $1.7 billion in expenses for the year.

Toyota cut its operating profit forecast for the financial year to end-March 2026 to 3.2 trillion yen ($21.7 billion), down from a previous outlook of 3.8 trillion yen. It had previously estimated a tariff hit of 180 billion yen for April and May, but that was solely for the impact from tariffs on Toyota’s vehicles. It had not issued a full-year projection until now.

For the first quarter from April to June, Toyota reported an operating profit of 1.17 trillion yen, down from 1.31 trillion a year earlier, but above the 902 billion average of seven analyst estimates compiled by LSEG.

Toyota’s North American business swung to an operating loss of 63.6 billion yen in the first quarter, from profit of 100.7 billion a year earlier, as it took a hit of 450 billion from the tariffs.

Its broad production operations, which include US, Canadian, Mexican and Japanese plants, expose it to tariffs not only on direct exports but also on vehicles and parts shipped across borders within North America.

Last week, the automaker said it turned out some 1.1 million Toyota and Lexus brand vehicles in North America in the first six months of 2025, including more than 700,000 in the United States.

The first-quarter results highlight the pressure US import tariffs are putting on Japanese automakers, even as a trade pact between Tokyo and Washington offers potential relief.

Under the deal agreed last month, Japanese auto exports into the United States would face a 15 per cent tariff, down from levies totalling 27.5 per cent previously. But a timeframe for the change has yet to be unveiled.

Last week, Toyota reported record global output and sales for the year’s first half, driven by strong demand in North America, Japan and China, including that for petrol-electric hybrid vehicles.

Toyota also announced on Thursday a plan to build a new vehicle factory in Japan, where car sales have been falling due to a shrinking population and declining ownership.

Toyota said it planned to start operations early next decade at the new plant, but has yet to decide production models.

US President Donald Trump’s tariffs are cleaving Japan Inc, as some big exporters like Toyota Motor slash their profit forecasts while Sony and Honda are among those saying the impact will be less than they had feared.

As Trump’s levies on global shipments into the US kicked in on Thursday, Japan’s top companies offered a mixed picture of the impact of his signature economic policy and of the stronger yen on his country’s fifth-largest trading partner.

Uncertainty over the tariffs and their erratic implementation have unnerved companies globally as governments work feverishly to strike deals and avert a crisis for their big exporters.

While glimmers of optimism have emerged for Japanese companies, the outlook remains overshadowed by uncertainty over when Trump will lower his tariffs on Japanese automobiles and new questions about duties on pharmaceuticals and semiconductors.

A Trump broadside on semiconductors, with 100% tariffs on some chip imports to the US, hit Japanese chip supply-chain firms on Thursday, while shares of companies elsewhere with US expansion plans jumped. Tokyo urged Washington on Thursday to swiftly implement last month’s bilateral agreement lowering tariffs on US imports of Japanese cars to 15% from the 27.5% in total levies in place since Trump raised tariffs in April.

Two weeks after Trump announced the deal, which he said included $550 billion in Japanese investment and loans in the US, Tokyo is scrambling to clarify specifics, complicating business planning for the nation’s biggest firms.

“It’s honestly very difficult for us to predict what will happen regarding the market environment,” Takanori Azuma, head of finance for Toyota, the world’s biggest automaker, said on Thursday.

Reuters