Toyota Plays Down Tariff Impact but Expects ¥1 Tril. Profit Drop; Strengthening Yen, Rising Material Costs Hit Company

By Shota Mizuno and Kaname Sugimoto / Yomiuri Shimbun Staff Writers

1:00 JST, May 10, 2025

Toyota Motor Corp. expects its operating profit to decline by around ¥1 trillion for the current fiscal year, according to a press release by the company.

However, the decline in the automaker’s performance may actually be more severe as its estimate only takes into account the projected impact of tariffs imposed by U.S. President Donald Trump’s administration for two months.

Toyota’s operating profit for fiscal 2025 was around ¥4.8 trillion. Its estimate for fiscal 2026 is ¥3.8 trillion, with factors including a strengthening yen and rising material costs also contributing to the drop.

Toyota expects its costs to increase by ¥180 billion in the two months of April and May as a result of the U.S. tariff measures. If the same impact were to continue for the entire fiscal year, a simple calculation shows that it would lower the automaker’s profit by ¥1.08 trillion. Combined with the other factors, the overall decline in Toyota’s operating profit could reach ¥2 trillion.

U.S.-based auto giant General Motors Co. said that the tariffs would cause its annual costs to rise by up to $5 billion (approximately ¥720 billion).

“Regarding U.S. tariffs, government-level negotiations are going on as we speak. Since nearly every detail is uncertain, it is difficult to foresee the future,” Toyota Motor President Koji Sato said at a press conference in Tokyo on Thursday, explaining why the automaker only partially included the impact of the tariffs in its business forecast.

Toyota’s decision was an apparent attempt to ease the concerns of its business partners and contractors and to encourage the Japanese government to stay calm and negotiate with the U.S. government.

“Considering our recent earnings structure, we do not need to panic about the U.S. tariffs at this time,” said Yoichi Miyazaki, executive vice president of Toyota, suggesting that the company will continue to closely pay attention to the negotiations between the Japanese and U.S. governments.

Avoiding price hikes

For its sales strategy for the U.S. market, Toyota will carefully watch the moves of competitors and their sales in the United States.

Of the 3.23 million vehicles Toyota produced in Japan in fiscal 2025, 540,000 units were exported to the United States. An additional 25% tariff is levied on imports from Japan to the United States, but Toyota indicates that it will not raise prices in the United States for the time being.

“We will not raise prices in a haphazard manner because of the tariffs,” Miyazaki said.

On the other hand, Toyota is considering exporting some vehicles intended for the U.S. market to other countries and regions in order to minimize the costs incurred by the tariffs. As a medium- and long-term measure, Toyota is considering expanding local development and local production in the future, according to Sato.

Increase investments

In the auto industry, competition in electrification and artificial intelligence has been intensifying in recent years.

Toyota plans to actively invest in next-generation technologies while reducing the impact of the tariffs as much as possible. The company has invested in technologies such as its operating system Arene OS, vehicle batteries and its Woven City in Shizuoka Prefecture – a demonstration city of about 700,000 square meters where Toyota tests advanced technologies including self-driving cars.

The automaker will make an additional investment of some ¥470 billion in the current fiscal year. “We will continue to make investments from a medium- and long-term perspective to strengthen the foundation of our business and develop future sources of revenue,” Sato said.

However, if the U.S. tariffs are imposed for a prolonged period, it will cause the real economy to slow down, which could affect Toyota’s sales strategy. If sales are sluggish, development investment will decline. As a result, Toyota may lag further behind Tesla and BYD, which have taken the lead in advanced technologies such as self-driving and electric vehicles.