Tariffs tank Toyota profits

Toyota, the world’s largest automaker, just recorded a multibillion-dollar hit from U.S. tariffs. In response, it’s cutting its full-year profit forecast – fueling broader fears that the trade war is only just beginning.

The company reported a sharp decline in profit for the April-June quarter, with net income down nearly 40% and operating income falling 11% to $7.9 billion, despite higher sales. It cited a $2.9 billion tariff-related hit in the quarter alone, the largest reported by any automaker so far, and warned the full-year cost could reach $9.5 billion.

The losses come amid confusion over the most recent trade deal between Japan and the Trump administration, which promised to lower tariffs on imported cars and parts to 15%. The current rate, imposed earlier this year, is nearly 30%. However, the agreement to lower the current figure lacks a formal implementation date.

As Ivan Espinosa, CEO of Nissan, said last week, “It’s still not clear to us what the conditions are, and when the change for tariffs from Japan to the U.S. will come into place.”

Industry toll at $12 billion and still rising

Across the industry, President Trump’s tariffs have already cost automakers in the U.S., Japan, and beyond nearly $12 billion to date, according to the Wall Street Journal, pushing many toward accelerated U.S. investment or price hikes — neither of which is easy to execute quickly.

Toyota, which sells more cars in the U.S. than any other market, has so far avoided raising prices, choosing instead to absorb the cost to protect market share. But that strategy may not be sustainable. Its near-40% drop in net profit was the steepest of any major automaker this quarter. And with the White House vowing to review the Japan trade deal every 90 days, the company and its suppliers are staring down long-term uncertainty — with many expecting prolonged pain rather than an easing of conditions.

“Japan’s automakers… are expecting little financial relief from the country’s recent trade deal with President Trump,” The New York Times reported Thursday.

Larger players better positioned to weather trade storm, smaller ones not so much

Despite the tariff drag, Toyota’s global sales rose 6% year over year, with electrified vehicle sales up 17%. The company said it continues to invest in its value chain, suppliers, and U.S. production in hopes of weathering the new trade environment, but warned that uncertainty remains high.

While Toyota has the scale to absorb the blow — for now — the situation is likely to be worse for smaller Japanese suppliers who lack the margin flexibility to compete under a 15% tariff regime. For Toyota, the priority remains protecting U.S. market share without raising prices, even if that means sacrificing profits.