World's leading carmaker sees 21% profit decline amid Trump's tariffs
What's the story
Toyota, the world's largest carmaker, has forecast a sharp 21% drop in profits for the current fiscal year.
The company's operating income is expected to hit 3.8 trillion yen ($26 billion) by March 2026, compared to 4.8 trillion yen last year.
The forecast comes amid several factors, such as currency fluctuations and tariffs imposed by US President Donald Trump.
Financial impact
Tariffs and currency fluctuations impact Toyota's forecast
Toyota has estimated that the tariffs imposed by Trump will directly cost it 180 billion yen in April and May.
However, the Japanese company predicts that currency fluctuations will have a more significant effect on its full-year forecast, amounting to 745 billion yen.
A weaker US dollar means less profit when US earnings are brought back home for Toyota.
CEO statement
Toyota CEO voices concerns around tariff uncertainty
Toyota's CEO Koji Sato recently voiced his concerns over the unclear nature of the tariffs at a press conference.
"Whether these tariffs are permanent or not, and what will happen is not something we can decide," he had said.
The uncertainty around these tariffs and their implications for global trade has weighed on the US dollar.
Market concerns
Analysts warn of potential impact on consumer sentiment
Analysts have expressed concerns that the tariffs may increase prices for consumers in the US and beyond, possibly leading to a decline in consumer sentiment.
Christopher Richter, an auto analyst at brokerage CLSA, warned that if the tariffs remain, it may be difficult for Toyota to meet its new profit forecast.
He said, "Right now, things are very rosy in the US just because customers are panicking and rushing to buy cars."
Market struggles
Toyota faces challenges in US and China markets
Apart from the effect of tariffs and currency fluctuations, Toyota is also dealing with high labor costs in the US.
The company might have to invest more if it chooses to expand its production base further in the country.
Despite witnessing a sales decline in China due to stiff competition from local brands, Toyota's vehicle sales there have fallen less than those of other Japanese automakers.
However, it continues to face declining sales in the world's largest auto market.