Toyota Faces Steepest Blow from Trump Tariffs Amid Escalating US-Japan Trade Tensions

Toyota Motor Corporation, the world’s largest automaker, is emerging as the biggest corporate casualty in the latest round of tariff measures implemented by the Trump administration. As part of President Donald Trump’s aggressive trade policies, new import duties have inflicted a significant financial toll on global automakers, with Toyota projected to suffer a $1.2 billion profit decline in just two months.

While other industry giants like General Motors and Ford have also reported heavy hits — GM slashed its full-year profit forecast by $5 billion and Ford expects a $1.5 billion annual impact — Toyota's situation stands out due to the scale of its exposure to the US market and its steadfast commitment to maintaining stable prices and production volumes.

Despite increasing its US-based production to more than half of its local sales, Toyota still imports approximately 1.2 million vehicles annually into the United States. This reliance on imports has drawn direct criticism from President Trump, who singled out Toyota during his Liberation Day speech for selling “one million foreign made automobiles” in the country.

The tariffs, which include a 25% duty on imported vehicles (effective April 3) and most auto parts (from May 3), have caught Toyota in a precarious position. The company has chosen not to immediately raise sticker prices at dealerships, instead absorbing the cost impact internally — a decision that has significantly dented its profitability. The automaker forecast operating income of ¥3.8 trillion ($26.1 billion) for the fiscal year ending March 2026, falling short of analyst expectations pegged at ¥4.7 trillion.

Japan’s chief trade negotiator, Ryosei Akazawa, underlined the severity of the situation, suggesting that one unnamed Japanese automaker is losing around $1 million every hour due to the tariffs — a figure that aligns closely with Toyota’s estimates. Negotiations between the US and Japan are ongoing, with hopes for a resolution by June, though the path forward remains uncertain.

Adding to Toyota’s challenges is the lack of manufacturing flexibility within the US. Its Kentucky plant, the largest in North America, is operating at nearly full capacity, limiting Toyota’s ability to shift additional production from overseas. While other Japanese automakers like Honda and Nissan are adjusting their global production strategies to mitigate tariff impacts, Toyota remains committed to maintaining its operational footprint in both Japan and the US.

In recent years, Toyota has heavily invested in its American operations, including a $13.9 billion outlay for a battery plant in North Carolina and a total of $21 billion in US investments since 2020. The company has increased its US workforce from 25,000 in 2016 to over 31,000 employees today, countering White House criticism with tangible economic contributions.

Nevertheless, models like the 4Runner, Prius, and various Lexus vehicles — all imported from Japan — remain vulnerable to ongoing tariff threats. Even as Toyota continues to assemble top-selling vehicles like the RAV4 hybrid and Corolla in Kentucky and Mississippi, its broader exposure to the Japanese production pipeline keeps the automaker in Washington’s crosshairs.

Ultimately, Toyota’s fate may hinge on the success of upcoming trade negotiations. With both sides entrenched and the US seeking to narrow its $68.5 billion trade deficit with Japan, finding common ground on auto tariffs will be pivotal. For Toyota, the stakes couldn’t be higher as it strives to balance its global manufacturing strategy with shifting political realities.