Summary
- Currency impact and tariffs weigh heavily on Toyota’s profit forecast
- Toyota faces risks from U.S. tariffs affecting exports and consumer sentiment
- Japan remains profitable for Toyota despite losses in North America
TOKYO, (Reuters) – Toyota Motor expects profit to decline by a fifth in the current financial year, it said on Thursday, as weakness in the U.S. dollar and the impact of President Donald Trump’s tariffs weigh on the world’s largest automaker.
In the latest example of how global trade disruption is hitting bottom lines, the world’s top-selling car manufacturer said it expected operating income to total 3.8 trillion yen ($26 billion) in the year to March 2026, versus 4.8 trillion yen in the year that just ended.
Toyota’s results also show how the tariffs have the potential to hit companies on a number of fronts simultaneously. While the automaker estimated the levies directly costing it at 180 billion in April and May, it said currency movement would be the biggest single impact on its full-year forecast, at 745 billion yen.
Uncertainty around Trump’s tariffs and their implication for global trade have weighed on the dollar. For Toyota, a weaker dollar means less profit when U.S. earnings are brought home.
Chief Executive Koji Sato told a press conference that details of the tariffs were largely unclear, adding to the difficulty in navigating them.
“Whether these tariffs are permanent or not, and what will happen is not something we can decide,” Sato said.
Analysts have warned that tariffs could trigger rising prices for consumers in the United States and elsewhere, leading to a downturn in consumer sentiment.
Operating profit for the three months through March was nearly flat, rising 0.3% to 1.12 trillion yen.
Like other global automakers doing business in the world’s top economy, Toyota could also face high labour costs and be forced to spend more on investment if it decides to expand its U.S. 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.
Japan, Toyota’s most profitable market, was the sole bright spot with an 18% profit increase in the fourth quarter.
The operating loss in North America, its biggest market, widened to 100 billion yen from 28 billion yen a year earlier, hit by a temporary production stoppage of its Indiana plant.
Toyota shares extended declines after the release, last trading down 1.3%. They had been down 0.3% shortly before the release.
($1 = 143.7000 yen)
Reporting by Daniel Leussink; Editing by Stephen Coates, David Dolan and Shri Navaratnam
