Toyota anticipates a $9.5 billion loss due to potential tariffs, lowers yearly earnings estimate
In the first half of 2025, Toyota, the renowned Japanese automaker, produced an impressive 1.1 million vehicles across North America, with over 700,000 of these manufactured in the United States. This production surge was part of a global output and sales record for Toyota, driven by strong demand in North America, Japan, and China, including petrol-electric hybrid vehicles [1].
However, the celebratory mood was tempered by the looming threat of tariffs. Toyota reported a $450 billion yen (~$3 billion) hit from tariffs in the first quarter of 2025, leading to a slashed annual profit forecast [2]. The U.S.-imposed tariffs on cars are expected to cost Japanese automakers like Toyota around $9.5 billion in 2026, based on Toyota’s own forecast for fiscal year 2026, assuming a 12.5% tariff rate on Japanese automotive goods between August 2025 and March 2026 [3].
These figures underscore the significant financial burden tariffs impose on Toyota specifically and imply substantial overall costs for Japanese automakers. On average, tariffs could add roughly $2,800 in cost per imported vehicle, with about 4-8% increases in retail prices expected for affected models by 2026. However, automakers have tried to absorb much of these costs to avoid large consumer price hikes [2].
Toyota's North American business swung to an operating loss of 63.6 billion yen in the first quarter of 2025, highlighting the pressure Japanese automakers, including Toyota, are facing from U.S. import tariffs [4].
Despite these challenges, there is a glimmer of hope. The trade pact between Tokyo and Washington offers potential relief, with Japanese auto exports into the United States facing a 15% tariff, down from 27.5%. However, the timeframe for the change in tariffs under the trade deal has yet to be unveiled [1].
In conclusion, Japanese auto exporters like Toyota face billion-dollar tariff-related profit hits mostly due to the 25% tariffs imposed starting mid-2025, with ongoing efforts to manage pricing impacts on U.S. consumers and maintain competitiveness. The implementation of the trade deal between Tokyo and Washington remains a crucial factor in mitigating these costs.
Sources:
- Reuters
- Bloomberg
- Nikkei Asia
- Forbes
- The Japan Times
- The financial impact of tariffs on Japanese automakers like Toyota is substantial, with the potential for an average cost increase of roughly $2,800 per imported vehicle and retail price hikes for affected models.
- In an effort to alleviate these costs, Japanese automakers are exploring options such as the trade pact between Tokyo and Washington, which could offer potential relief with a decrease in tariffs on Japanese auto exports to the United States.
