Toyota Slashes Profit Forecast, Sees $9.5 Billion Tariff Hit

Toyota Motor, the world’s biggest carmaker, dropped a bombshell on Thursday, saying it expects that President Donald Trump’s tariffs on imported cars will cost it nearly $10 billion.

The news from the Japanese car giant is the highest estimate yet by any company and is based on Toyota’s expectation that its full-year operating profit will drop by 16%.

It shows the challenge that global manufacturers are grappling amid rising costs from US levies on cars, parts, steel and aluminium.

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“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 ($9.5 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.

Many carmakers will take a hit

Rivals have reported smaller impacts so far: GM has projected a $4-5 billion tariff hit 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.

Huge pressure on carmakers despite deal

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% tariff, down from levies totalling 27.5% 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.

The company’s shares ended down 1.5% after the earnings release.

Given this sort of news, it is perhaps no surprise that the Japanese government has cut its growth forecast for the 2026 financial year to 0.7% from the 1.2% projected in January.