Due to tariff impacts, Toyota's net profit in the first fiscal quarter plummeted by 37%, with an expected annual profit reduction of nearly 10 billion dollars

Trump's auto tariffs severely impact global automotive giants—Japan's Toyota Motor.

According to the first-quarter performance report for the fiscal year 2026 released by Toyota Motor, net profit in the first fiscal quarter plummeted by 36.9% year-on-year to 841 billion yen. The company expects to lose 1.4 trillion yen (approximately 9.5 billion USD) in operating profit for the fiscal year ending March 2026 due to the increase in U.S. auto tariffs. This impact stems from President Trump's imposition of a 25% tariff on Japanese auto imports in April, significantly higher than the previous 2.5% level.

Toyota has lowered its full-year net profit forecast by 14% to 2.6 trillion yen. The company's Chief Accounting Officer Takanori Azuma stated, "The significant increase in tariffs from the previous 2.5% has clearly had a major impact, which is an uncontrollable factor for us."

Despite facing tariff pressures, Toyota's global sales in the first fiscal quarter still grew by 7% to 2.4 million vehicles, with a 12.7% increase in the North American market. North America remains Toyota's largest market, accounting for 33% of total sales. The company is responding to the impact through price increases, expanding production capacity in the U.S., and cutting costs.

In addition to Toyota, other Japanese automakers are also severely affected by the tariffs. Honda reported an operating loss of 29.6 billion yen in the first fiscal quarter, while Mazda incurred a loss of 46 billion yen. Both companies are adjusting their strategies to focus on expanding domestic production in the U.S. and re-planning export routes from Japan.

Tariff impact exceeds expectations, full-year profit significantly revised down

Toyota originally expected the U.S. tariffs to result in a loss of only 180 billion yen in April and May, but with the full implementation of the 25% auto tariff in April, the company now anticipates a reduction of 1.4 trillion yen in operating profit for the entire fiscal year, forcing it to lower its net profit forecast by 14%.

Notably, the 1.4 trillion yen loss in operating profit is equivalent to approximately 9.5 billion USD, representing a significant portion of the company's annual operating profit.

Data from the first fiscal quarter shows that tariffs have had a substantial impact on performance.

Operating profit fell by 10.9% to 1.1 trillion yen, with tariffs alone reducing operating profit by 450 billion yen. Currency fluctuations are expected to further cut profits by 725 billion yen, and rising raw material costs will also reduce profits by 300 billion yen.

According to CCTV News, on July 23, the U.S. and Japan reached an agreement on tariffs. Under the terms of the agreement, the U.S. will impose a uniform 15% tariff on Japanese goods, including automobiles, lower than the 25% rate previously threatened by Trump. However, Azuma admitted, "The outcome of the trade agreement is still challenging."

In response to the tariff impact, Toyota is taking multiple measures to mitigate the effects. Azuma stated that if there is excess production capacity in the U.S., the company will utilize it and optimize operations by considering various possible scenarios.

In terms of pricing strategy, Toyota will increase the average price of new cars produced in the U.S. by 270 USD after July 1. Azuma mentioned that the company will consider further price adjustments at an appropriate time when customers can accept them In terms of capacity layout, Toyota announced plans to build a new manufacturing plant in Toyota City, Aichi Prefecture, expected to start production in the early 2030s. "Maintaining a production base of 3 million vehicles in Japan is our top priority," Azuma stated, "This is the foundation of Toyota's business."