Toyota lowers profit forecast amid U.S. auto tariffs

Toyota Motor Co., the world’s largest automaker by sales volume, reported a drop in operating profit for the June quarter, driven largely by U.S. tariffs on imported vehicles and currency fluctuations. Although quarterly revenue slightly exceeded analyst estimates, operating profit fell 11% year over year, with a ¥450 billion ($3.1 billion) loss attributed to U.S. tariffs. Net income dropped 37%, prompting Toyota to reduce its full-year operating profit forecast by ¥600 billion to ¥3.2 trillion for the fiscal year ending March 2026.

Despite these challenges, Toyota continues to benefit from strong global vehicle demand and has made investments aimed at offsetting negative tariff impacts. The company expects the new U.S.-Japan trade agreement, which reduces tariffs to 15% will help stabilize earnings, though timing remains uncertain.

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Here’s why it matters:

Dealers, especially those selling Toyota vehicles or operating in markets affected by tariffs and exchange rates, should be aware of how these macroeconomic factors influence vehicle pricing, availability, and profit margins. Understanding Toyota’s challenges and strategic responses, including pricing and localization efforts, can help dealers anticipate inventory adjustments and shifts in consumer demand. Additionally, dealers can use the context of tariff impacts and trade agreements to better inform customers about pricing trends and the competitive landscape.

Key takeaways:

• Profits down, but sales up:
  Toyota’s operating profit fell 11% YoY despite topping revenue expectations. The automaker’s net income also dropped 37%, which was impacted heavily by U.S. tariffs.
• Tariff costs bite hard:
  A ¥450 billion ($3B) hit from U.S. import tariffs forced Toyota to lower its annual profit forecast to ¥3.2 trillion for FY 2026.
• Record global sales offer hope:
  Despite margin compression, Toyota posted record global sales in the first half of 2025, demonstrating robust global demand.
• Currency & cost pressures remain:
  A stronger yen and increased domestic expenses are squeezing profitability, further influencing pricing and dealer margins.
• Tariff relief in sight:
  A new Japan-U.S. deal may lower tariffs to 15%, potentially improving long-term cost structures for Japanese brands and dealers.