• Toyota anticipates a 21% decline in operating profit for fiscal year 2025.
• The company predicts a $1.3 billion impact from U.S. tariffs alone in April and May.
• Forecasted net profit for 2025-26 is set at 3.1 trillion yen, reflecting a 35% year-on-year drop.

Toyota Motor Corporation has warned of a 21% decline in operating profit for the current financial year, forecasting total operating income of ¥3.8 trillion ($26 billion) for the year ending March 31, 2026. This prediction falls significantly short of prior analyst expectations and highlights the ongoing struggles caused by U.S. tariffs and a strengthening yen, which have dampened hybrid vehicle demand. Last year's operating income was reported at ¥4.8 trillion, marking a stark contrast to this year's revision, according to Channel News Asia and South China Morning Post.

The automaker has also estimated that U.S. tariffs will incur an additional $1.3 billion loss just during the months of April and May. These tariffs are part of wider trade disruptions initiated by U.S. President Trump's administration, which continue to create uncertainty in the automotive market. Toyota's chief executive, Koji Sato, noted that the conditions surrounding the industry are in "extreme flux," complicating their ability to predict the longer-term consequences, as tariffs on automobiles and parts have recently expanded according to New York Times.

As a result of these ongoing developments, Toyota is currently forecasting a concerning 35% drop in net profit for the fiscal year 2025-26, estimating it at ¥3.1 trillion (approximately $21.6 billion). The anticipated impact from U.S. tariffs has been tentatively factored into their assessments, further underscoring the vulnerable position of Japanese automakers amid U.S. trade policies. These findings reflect not only on Toyota but also on the broader implications for Japan's automotive export market, where approximately 28% of total exports are automobiles, as reported by The Jakarta Post.

In light of these financial forecasts, Toyota's commitment to local production in the U.S. is becoming increasingly critical. Sato emphasized the need for the company to adjust shipments while continuing to maintain production levels in Japan, protecting supply chains, and securing foreign currency earnings. The industry is grappling with how to remain competitive and adapt amidst governmental negotiations over tariffs, which continue to shift and evolve, indicating an uncertain path ahead for the automotive market according to South China Morning Post and The Jakarta Post.