Toyota anticipates a 16% fall in profits, attributed to tariffs imposed by the Trump administration.
In recent developments, Donald Trump's trade tariffs have affected the automotive sector, particularly in Japan. The latest wave of U.S. tariffs has raised rates on imports from dozens of countries, including Japan.
Initially, Trump threatened a 25% tariff on Japanese cars, and an effective 27.5% tariff was imposed in March 2025. However, following a new trade deal, this tariff was lowered to 15%, providing some relief but still increasing costs for Japanese automakers selling in the U.S.
The anticipated annual impact on Toyota includes higher levies on Japanese vehicle exports to the U.S., increased material costs, and effects of a stronger yen. As a result, Toyota expects a ¥1.4 trillion (A$13.8 billion) loss due to U.S. trade tariffs.
Rival Honda was also affected, reporting a 50% slump in profit to ¥244 billion (A$2.4 billion), citing a ¥124 billion (A$1.2 billion) tariff-related hit.
The tariff increase acts as an import tax, leading to higher costs for Japanese automakers, which could translate to price hikes for U.S. consumers from roughly $1,500 to $3,000 depending on the vehicle model.
Because the tariff is lower for imports from Japan than for vehicles assembled in Mexico, Japanese automakers might adjust production strategies, potentially reducing assembly in Mexico and increasing imports directly from Japan. This dynamic also inadvertently harms U.S. auto parts producers in Mexico and Canada due to altered supply chains.
As part of the deal, Japan agreed to open its market more fully to U.S. autos and invest $550 billion in U.S. sectors including automotive manufacturing, alongside lowering some non-tariff barriers.
Despite these trade headwinds, Toyota achieved record first-half sales, delivering 5.1 million vehicles globally, up 5.5%. Strong demand for Toyota's hybrid models contributed to this success.
The automotive sector in Japan accounts for approximately 8% of jobs and over a quarter of the country's exports to the U.S. The measures are part of the administration's "reciprocal" trade strategy aimed at rebalancing U.S. trade relationships.
In summary, Trump's tariffs initially raised the cost of Japanese automotive imports substantially but the later negotiated trade deal reduced the tariff to 15%, mitigating some impact but still increasing costs and prompting shifts in production and trade patterns that affect the U.S. auto industry and consumers.
[1] The New York Times
[2] Bloomberg
[3] Reuters
[1] Despite the shift in production strategies and increased costs, the Japanese automotive sector continued to battle challenging weather conditions in the U.S., further hindering sales. [2] Sports enthusiasts might therefore find it difficult to procure their preferred Japanese vehicles due to the combination of trade tariffs and adverse weather conditions affecting suppliers and manufacturers.
