Toyota Motor Corp. (TM), the world’s largest automaker, is also the biggest casualty of Donald Trump’s auto-related trade war.
Tariffs on imported cars and parts forced General Motors Co. to cut annual earnings guidance by up to $5 billion, while Ford Motor Co. faces a $1.5 billion hit. Toyota alone reported a $1.2 billion profit drop in just two months. The Japanese automaker now expects operating profit of 3.8 trillion yen ($26.1 billion) for the fiscal year ending March 2026, well below the 4.7 trillion yen analysts had forecast.
Although Toyota has increased its U.S. production to cover over half of its sales in the country, it still depends heavily on imported models and components—about 1.2 million units annually. The White House has taken notice, and Trump named Toyota specifically in his controversial "Liberation Day" speech on April 2.
"Tariff-related details are still extremely fluid," said Toyota CEO Koji Sato last week. "It’s difficult to take concrete action or assess the impact right now."
Japan’s chief trade negotiator Ryosei Akazawa noted on April 30 that one Japanese automaker is losing about $1 million per hour due to current tariffs. That estimate aligns with Toyota’s expected $1.2 billion loss over a standard 730-hour month.
Most imported vehicles became subject to a 25% U.S. tariff starting April 3, and most auto parts followed under the new duties as of May 3. Given that the U.S. remains the largest market for Japan’s top five carmakers, even modest tariff hikes could have oversized impacts on profitability.
On May 8, the Trump administration reached its first trade agreement with the UK. In contrast, the U.S. posted a $68.5 billion goods trade deficit with Japan last year, compared to an $11.9 billion surplus with the UK.
Some Japanese automakers are already repositioning global production to adjust. Nissan has halted U.S. orders for SUVs made in Mexico. Honda is shifting production of its hybrid Civic from Japan to the U.S.
Toyota has made significant investments to expand its U.S. operations, including $13.9 billion for a new battery plant in North Carolina. However, the company is also committed to maintaining a robust domestic production base, with Chairman Akio Toyoda pledging to keep annual production in Japan at 3 million units.
Globally, Toyota sold 10.8 million vehicles in 2024, with the U.S. accounting for just under one-quarter of the total. About half were produced locally, another 30% came from Canada and Mexico, and 281,000 units were imported directly from Japan.
Toyota’s best-selling U.S. models—the RAV4 hybrid crossover and the Corolla sedan—are assembled in Kentucky and Mississippi, respectively. But the gasoline-only RAV4 is imported from Canada, and the plug-in hybrid version comes from Japan.
This exposure has made Toyota a target of Trump’s policies, and the automaker’s fortunes are now closely tied to the outcome of U.S.–Japan trade talks.
One major issue Toyota faces is limited production flexibility within the U.S. Its Kentucky Georgetown plant is already running at nearly full capacity as of late April, leaving little room to shift additional vehicle output from overseas.
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