Seoul Gazette - Toyota cites tariffs as it forecasts 35% net profit drop

Carmakers have been among the hardest hit by the US president's multi-pronged assault on free trade.

On top of a 25 percent tariff already placed on finished imported cars, the Trump administration on Saturday imposed a similar duty on auto parts including engines and transmissions.

For the 2025-26 financial year that began in April, Toyota now forecasts net profit of 3.1 trillion yen ($21.6 billion).

"The estimated impact of US tariffs in April and May 2025 have been tentatively factored in," the world's top-selling automaker said in a statement.

The company logged net profit of nearly 4.8 trillion yen in the 12 months to March 31, down 3.6 percent year-on-year but beating its forecast issued in February of 4.5 trillion yen.

As of this month, it estimated the tariffs would impact 2025-2026 operating profit to the tune of 180 billion yen.

Asked about the more long-term impact of the tariffs, Toyota's president and CEO Koji Sato told reporters the situation was "difficult to predict right now".

"US tariffs are currently being negotiated between governments, and details are still fluid," he said.

Toyota exports 500,000 vehicles annually to the United States from Japan, Sato said.

"So in the short-term we are adjusting shipments... while mid- to long-term, we will pursue the local development of products that suit local customers."

But the company will aim to maintain its production in Japan of three million vehicles annually, he said, "from the viewpoint of protecting supply chains and earning foreign currencies by exporting".

- 'Benchmark' forecast -

Toyota shares were trading down 1.3 percent after the earnings announcement.

The automaker's "influence and position" mean its profit forecasts are being closely watched in Japan, Bloomberg Intelligence auto analyst Tatsuo Yoshida told AFP.

"The whole country including suppliers would be left at a loss if Toyota doesn't issue some kind of benchmark" on the impact of the tariffs, he said ahead of Thursday's results.

Automobiles accounted for around 28 percent of Japanese exports to the United States last year.

Trump moved to soften the details of his tariffs on automakers late last month -- signing an executive order to limit the impact of overlapping levies on firms.

The president also released a proclamation that gives the industry a two-year grace period to move supply chains back to the United States.

Toyota sold 10.8 million vehicles worldwide in 2024, holding onto its crown as the world's top-selling automaker.

"Automakers are doing what they can in trying to shift production to the United States, even though there are no huge changes (right away) as shifting production takes time," Takaki Nakanishi of auto sector consulting firm Nakanishi Research Institute told AFP.

Trump last month hit out at the wide difference between Japanese car exports to the United States and those going the other way.

Toyota is the second-top-selling automaker in the United States, where it shifted more than 2.3 million vehicles last year, while US industry leader General Motors sold just 587 Chevrolets and 449 Cadillacs in Japan.

Experts say Japan's narrow roads -- too narrow for many US models -- and Japanese cars' reputation for quality and fuel efficiency are some reasons for this.

"They don't take our cars, but we take MILLIONS of theirs!" Trump said in April, accusing Japan of treating its ally "very poorly on trade".

B.Ha--SG