Profit Falls Despite Strong Revenue and Global Demand
Toyota Motor has lowered its annual operating income forecast as U.S. import tariffs weigh on earnings. Although the company posted revenue of 12.25 trillion yen ($83.4 billion) for the quarter ending in June—beating analyst estimates of 12.19 trillion yen—its operating profit dropped 11% year over year to 1.17 trillion yen. The decline was primarily attributed to 450 billion yen in losses tied to elevated U.S. tariffs.
Net income attributable to Toyota fell sharply by 37%, reaching 841.3 billion yen. As a result, the automaker revised its full-year operating income forecast downward by 600 billion yen to 3.2 trillion yen for the fiscal year ending in March 2026. Toyota cited U.S. tariffs and exchange rate fluctuations as key contributors to the downward revision.
Tariff Impact and Export Dynamics
The 25% tariff imposed by the United States on imported vehicles, introduced earlier this year under President Donald Trump’s administration, has impacted Japanese automakers across the board. Toyota, alongside peers such as Honda, faced higher costs to maintain U.S. market share, often resorting to price cuts. These measures led to margin compression, even though export volumes to the U.S. remained steady.
Japan’s Ministry of Trade reported that in June, the value of Japanese car exports to the U.S. fell by 25.3% year over year, while the volume of vehicle exports actually rose by 4.6%. This divergence reflects the added cost burden automakers had to absorb, driven by tariffs and an unfavorable exchange rate.
Policy Shift May Offer Relief
A new trade agreement between Japan and the U.S. was recently announced, with tariffs expected to be reduced to 15%. However, the timing of the rate adjustment remains uncertain. Toyota stated that the financial impact of U.S. tariffs on its full-year results is projected to reach 1.4 trillion yen. While this pressure is expected to ease under the new agreement, immediate relief is unlikely.
Industry analysts suggest that localization of manufacturing and pricing adjustments may help stabilize earnings in the medium term. Abhik Mukherjee, an automotive analyst at Counterpoint Research, noted that Japanese brands could benefit in the long term compared to competitors from NAFTA countries that still face elevated tariff levels.
Investments and Long-Term Strategy Continue
Despite the profit decline, Toyota emphasized its continued investment in operations and its efforts to expand value chain profits. The company reported record global sales in the first half of the year, supported by increased unit sales and cost reduction strategies. However, rising operational expenses in Japan and currency fluctuations have weighed on domestic income.
Toyota’s long-term strategy focuses on resilience amid a challenging external environment. With ongoing adjustments in trade policy and production localization, the company aims to gradually offset short-term losses and position itself for sustained profitability.
