Toyota Says Tariffs Will Erase $1.3 Billion in Profits in Just 2 Months-OxBig News Network

A year ago, the world’s biggest automaker was on a tear. American consumers were snapping up Toyota Motor’s hybrids, and a weak yen inflated the value of the company’s earnings. That May, Toyota reported the highest annual profit ever recorded by a Japanese firm.

On Thursday, Toyota presented a significantly more somber outlook, projecting that its operating profit would decline by about one-fifth for the fiscal year ending in March. It cited headwinds from a stronger yen and predicted a $1.3 billion hit from President Trump’s tariffs in April and May alone.

The company estimated the effect of the auto tariffs, which started in April, only for those two months. Beyond that, their impact is “very difficult to forecast,” Toyota’s chief executive, Koji Sato, said in a briefing on Thursday. “The current environment surrounding the auto industry, including trade relations, is in extreme flux,” he said.

The murkiness of Toyota’s forecast underscores how the whiplash of Mr. Trump’s tariff agenda is upheaving the auto industry and leaving many global companies unable to estimate future prospects. A 25 percent tariff on vehicle imports into the United States, implemented early last month, was extended to auto parts last week.

The pain that Toyota is already experiencing from tariffs also highlights the difficult bind that Japan faces in its ongoing negotiations with the Trump administration.

While Mr. Trump has paused an across-the-board 24 percent tax on imports from Japan until early July, higher auto tariffs are already in place and hurting the country’s mainstay industry. Automobiles and auto parts are by far Japan’s top export to the United States.

Ryosei Akazawa, Tokyo’s top envoy for the tariff talks, said recently that the new U.S. tariffs were costing one Japanese automaker $1 million per hour. Yet negotiations have moved slowly, bogging down at least in part because Washington has signaled that Japan’s primary demand — an exemption from auto tariffs — is not up for negotiation.

In remarks made over the weekend after returning from the latest round of talks in Washington, Mr. Akazawa said the two sides were unable to find common ground. Prime Minister Shigeru Ishiba urged patience, saying that Japan should not rush to reach an agreement that would sacrifice the country’s longer-term interests.

Economists and officials are concerned about the tariffs’ broader potential impact on the Japanese economy, as automakers and their extensive network of parts suppliers form the backbone of industrial production in Japan. Last week, Japan’s central bank more than halved its economic growth forecast, citing the imposition of an “unprecedented level” of tariffs by the United States.

Toyota’s remarks on Thursday suggested a challenging period ahead for the Japanese auto industry as a whole, particularly because most analysts consider Toyota to be among the Japanese carmakers least vulnerable to Mr. Trump’s tariffs.

Smaller Japanese automakers such as Mazda and Subaru sell a significantly higher proportion of imported vehicles in the United States, while Mitsubishi Motors does not have any factories in the country. Japan’s second- and third-largest automakers, Honda and Nissan, are set to announce fiscal year earnings next week.

Automakers outside Japan are also anticipating difficulties. Last week, General Motors lowered its 2025 profit forecast by over 20 percent, citing projected cost increases of $4 billion or more this year because of the Trump tariffs. Many European automakers moved to suspend their financial forecasts for 2025 because of tariff uncertainties.