Toyota records a 37% profit drop, a $9.5 billion hit from Trump tariffs

Toyota’s Q2 earnings showed a 37% fall in profit to 842 billion yen ($5.7 billion), primarily driven by the U.S. tariffs. The Trump tariffs accounted for an estimated annual cost of $9.5 billion. The Japanese automaker has effectively revised its yearly profit forecast down by 600 billion yen to 3.2 trillion yen.

The automaker anticipates a 1.4 trillion yen ($9.5 billion) annual hit from levies imposed by the U.S. on product exports/imports. It announced a quarterly profit of 841 billion yen ($5.7 billion), down from 1.33 trillion yen a year ago. Despite a 3% increase in global sales, the automobile company was slapped with a reduction in operating profits by 450 billion yen ($3 billion), resulting from Trump tariffs alone. 

Toyota revises its annual profit forecast down

Toyota revised its annual operating profit down by 600 billion yen to 3.2 trillion yen following the anticipated $9.5 billion yearly hit from Trump tariffs. The automaker cited unfavorable exchange rates and rising operational costs in Japan as the key drivers for weak earnings during Q2. The company press argued further that despite the challenges, it has continued to invest comprehensively, improve sales, and cut costs. 

The company could not avoid the decline despite strong global demand in Q1 of 2025. The Japanese automaker recorded a 7.4% year-over-year increase in international sales. It sold 5.5 million units compared to 5.1 million units last year. Retail sales recorded 2.4 million units, up from 2.2 million last year. Notable regions that drove the sales included Japan, North America, and Europe. 

The U.S imposed a 25% import tariff in April on Japanese vehicles, highly impacting Toyota and Honda. According to Japan’s Ministry of Trade data, Japanese vehicle exports reduced by 25.3% year on year in June, despite a 4.6% rise in export volumes to the U.S. Some analysts have said the divergence proves how automakers have been forced to take tariff-related costs by squeezing their margins, even though sales continue to grow. According to the Japanese customs data, auto exports to America form a crucial part of the Japanese economy, accounting for 24% of the total vehicle exports in 2024. 

Toyota offers dealership access to the U.S competition in a tariff relief bid

Toyota has offered to increase its shipments to the U.S. and assist American competitors with dealership access to the Japanese markets to ease tariff pressure. The initiative coincides with the ongoing negotiations between the U.S. and Japan to reduce tariffs to 15%. The automaker is still uncertain about when the reduced rate will take effect. 

The Japanese automaker based its profit forecasts on the assumption that Trump will cut the levies on imports to 12.5% starting this month. The levies remain at 15%, straining the automaker’s margins even further and triggering another decline in the annual profit forecasts. Some analysts have revealed that Toyota is among the most hit companies by the Trump tariffs. 

In an exclusive interview with CNBC, Abhik Mukherjee, an automotive analyst at Counterpoint Research, revealed that Japanese automakers faced significant profit pressure earlier this year due to elevated U.S. import tariffs and a stronger yen. He added that despite higher vehicle export volumes to the U.S., the higher costs from tariffs squeezed the automaker’s margins. 

Mukherjee believes that Japanese automakers still face margin reductions from the strong yen and high operation costs. However, he said the 15% reduced rate plus pricing adjustments could stabilize the annual earnings. He added that Japanese automakers have a competitive advantage over competitors in the NAFTA region (including Canada, Mexico, and the U.S.), who still face higher tariffs.