The trade war set off by the U.S. has left one automaker suffering from the biggest collateral damage. Japanese auto giant Toyota. In just two months, the Japanese giant anticipates a $1.2 billion USD drop in profits due to new tariffs imposed on imported cars and parts.
That’s more than Ford, which expects a $1.5 billion impact for the year, and more than General Motors, which has already revised its forecast downward by $5 billion for 2025.
Massive impact despite strong production presence in U.S.
Toyota has actually invested heavily in the United States: more than half of the vehicles sold in that market are assembled domestically, and the company employs 31,000 workers within the U.S. In recent years it also invested $13.9 billion USD in a new battery plant in North Carolina.
However, the company still imports 1.2 million vehicles per year into the U.S., including popular models like the 4Runner and Prius and several luxury Lexus vehicles.
U.S. President Trump did not fail to highlight the volume of imports in a speech delivered on April 2nd at the White House, in which he denounced the “one million foreign cars from Toyota” sold on American soil.
Tariffs in effect and tense negotiations
Since April 3rd, the majority of imported vehicles have been subject to a 25 percent tax, which was extended to auto parts on May 3rd. The five largest Japanese automakers are heavily dependent on the American market making them particularly vulnerable.
According to Ryosei Akazawa, Japan's chief trade negotiator, one unnamed Japanese automaker is currently losing upwards of $1 million USD per hour due to the tariffs.
Talks between Japan and the U.S. began in February, with the next round scheduled for late May. Akazawa hopes for an agreement by June, but the concessions demanded make the prospects uncertain.
Strategic responses from japanese manufacturers
To limit losses, some manufacturers are reacting: Nissan has stopped American orders for certain SUVs built in Mexico, Honda is transferring assembly of the Civic hybrid to the U.S., and Mazda has even suspended exports to Canada of a model produced in Alabama.
For now, Toyota is maintaining its operations while seeking to reduce its fixed costs as it keeps a close eye on decisions being made by the U.S. administration. It’s worth noting that since its Georgetown, Kentucky plant is already operating at full capacity, Toyota has limited room to manoeuvre to relocate production.
The Toyota dilemma: Produce more here or keep Japan afloat
Despite its investments in the United States, Toyota remains faithful to its Japanese roots, with a renewed promise to produce at least three million vehicles per year in Japan. In 2024, the company assembled 3.1 million units there, nearly a third of its global production.
With 10.8 million vehicles sold worldwide in 2024, a quarter of them in the U.S., Toyota remains on solid ground. But the White House’s trade war is a reminder that the globalization of the automotive industry remains fragile, especially in the face of an unpredictable political climate.