Toyota expects profits to tumble 21% as tariffs bite

Toyota Motor expects profit to decline by a fifth this current financial year, it said on Thursday, as weakness in the dollar and the impact of President Donald Trump’s tariffs weigh on the world’s largest carmaker.

In the latest example of how global trade disruption is hitting bottom lines, the world’s top-selling car manufacturer said it expected operating income to total ¥3.8-trillion ($26bn) in the year to end-March 2026, versus ¥4.8-trillion in the year that just ended.

Toyota’s results also show how the tariffs have the potential to hit companies on a number of fronts simultaneously. While the carmaker estimated the levies directly costing it ¥180bn in April and May, it said currency movement would be the biggest single impact on its full-year forecast, at ¥745bn.

Uncertainty around Trump’s tariffs and their implication for global trade have weighed on the dollar. For Toyota, a weaker dollar means less profit when US earnings are brought home.

CEO Koji Sato told a press conference that details of the tariffs were largely unclear, adding to the difficulty in navigating them.

“Whether these tariffs are permanent or not, and what will happen is not something we can decide,” Sato said.

Analysts have warned that tariffs could trigger rising prices for buyers in the US and elsewhere, leading to a downturn in consumer sentiment.

Operating profit for the three months through March was nearly flat, rising 0.3% to ¥1.12-trillion.

There was a significant risk that Toyota could find it difficult to achieve its new profit forecast if the tariffs were retained, said Christopher Richter, a motoring analyst at brokerage CLSA.

“Right now, things are very rosy in the US just because customers are panicking and rushing to the market to buy cars. But what happens if these tariffs continue? You need to raise prices,” he said.

“Can you grow sales like that? I don’t know.”

Like other global carmakers doing business in the world’s top economy, Toyota could also face high labour costs and be forced to spend more on investment if it decides to expand its US production base further.

While Toyota has seen its vehicle sales in China fall less than other Japanese carmakers, it has still struggled to halt a sales decline in the world’s biggest car market amid heavy competition from Chinese brands.

Japan, Toyota’s most profitable market, was the sole bright spot with an 18% profit increase in the fourth quarter.

The operating loss in North America, its biggest market, widened to ¥100bn from ¥28bn a year earlier, hit by a temporary production stoppage at its Indiana plant.

Toyota shares extended declines after the release, closing down 1.3% on the day. They were down 0.3% shortly before the announcement.

Reuters