The world’s largest automaker reports a 21% profit drop as tariffs take a toll

Toyota Motor forecast a 21% profit decline for the current financial year on Thursday, as the strain from US President Donald Trump’s tariffs and an appreciating yen take some of the shine off strong demand for hybrid vehicles.

The world’s top-selling automaker expects operating income to total 3.8 trillion yen ($26 billion) in the year to March 2026, versus 4.8 trillion yen in the financial year that just ended. That was roughly in line with the 4.75 trillion yen average of 25 analysts surveyed by LSEG.

Toyota faces the risk of being hit by widespread fallout from Trump’s tariffs, not only from the impact on its US-bound exports but also because of the potential for a downturn in consumer sentiment in the US and elsewhere. Price rises can lead to a decline in consumer sentiment.

The lower profit for the coming year was due to the negative impact from a stronger yen, as well as higher material prices and the impact of tariffs, Toyota said in a presentation.

Like other global automakers doing business in the world’s top economy, Toyota could face high labor costs and be forced to spend more on investment, if it decides to expand its US production base further.

While Toyota has seen its vehicle sales in China fall less than other Japanese automakers, it has still struggled to halt a sales decline in the world’s biggest auto market amid heavy competition from Chinese brands.