Japanese Automakers Take a Big Hit From Tariffs

President Donald Trump said he would lower tariffs on Japan, but the impact of his tariff policy continues to shake Japan’s auto industry.

Toyota said in its earnings report on Thursday that it expected Trump’s auto tariffs to reduce its operating income for the 2026 fiscal year by 1.4 trillion Japanese yen, or $9.5 billion. That’s 1.2 trillion Japanese yen higher than what it had initially forecast.

Toyota said the tariffs caused its operating income for the North American market to decline. The company cited “exchange rate fluctuations and increased expenses” for the fall in operating income in the Japanese market.

“Due to the impact of US tariffs and other factors, actual results showed decreased operating income, and the forecast has been revised downward,” Toyota said in its first-quarter results summary.

Honda reported a 50% fall in year-over-year operating profits on Wednesday. The automaker said that the tariffs had cost it around 122 billion Japanese yen in lost profits in the past three months, and warned the total hit this year could be as much as 450 billion Japanese yen.

Honda executives, however, said the impact of the tariffs would be less severe than initially expected, and the company raised its full-year operating profit forecast by 40%.

Automakers like Toyota and Honda were given a reprieve last month after the US and Japan struck a trade deal.

The deal, which lowered the tariff on Japanese auto imports to the US market from 25% to 15%, means that Japanese automakers face lower tariffs than their American rivals Ford and GM, who face a 25% tax on vehicle parts coming from overseas.

Last week, Ford CEO Jim Farley warned that the trade deal handed Japan’s car giants a “meaningful advantage,” telling Bloomberg that it could allow Toyota to undercut some Ford models by as much as $10,000.