I just arrived in Tokyo after what felt like the longest flight from D.C., and the mood among automotive executives couldn’t be more tense. The streets of the financial district are buzzing with analysis of Toyota’s latest earnings report—a shock to the system for the world’s most valuable automaker.
Toyota Motor Corp announced yesterday a 37% plunge in quarterly profit, sending tremors through global markets as the company slashed its annual forecast, citing the immediate impact of President Trump’s aggressive trade policies. The automotive giant now expects operating profit to fall by 22% for the fiscal year, a dramatic revision that has caught many industry observers off guard.
“We’ve been preparing contingency plans since the election, but the speed and scale of these tariffs exceeded even our most cautious scenarios,” confided Akio Toyoda during a press briefing I attended this morning. The company president’s normally measured demeanor showed visible strain as he outlined the challenges ahead.
The 45% tariffs on vehicles imported from Japan took effect with remarkable speed following President Trump’s return to office, fulfilling a campaign promise that many analysts believed would face more legislative hurdles or be used primarily as negotiating leverage.
For Toyota, which manufactures approximately 30% of its U.S.-sold vehicles in Japan, the math is brutal. Despite operating eight manufacturing plants across America and employing over 36,000 U.S. workers, the company remains vulnerable to tariffs on its higher-end models and specialized vehicles still produced in Japan.
Walking through Toyota’s gleaming headquarters, I spoke with three mid-level managers who requested anonymity. “We’re caught in a political crossfire,” one explained. “We’ve invested billions in American manufacturing, yet we’re being treated as if we haven’t committed to the U.S. market.”
Financial data from the Bank of Japan indicates the yen has strengthened 8% against the dollar since the tariffs were announced, creating a double-penalty for Japanese manufacturers. The currency shift alone would have pressured profits, but combined with tariffs, it’s forcing rapid strategic shifts.
According to U.S. Commerce Department figures, Japanese auto imports accounted for approximately $43.6 billion in 2024, representing roughly 14% of America’s trade deficit with Japan. This makes them an obvious target for an administration focused on reducing trade imbalances through direct intervention.
The consumer impact remains unclear. Toyota executives confirmed they’ve absorbed some tariff costs but will inevitably pass portions to American buyers. Industry analysis from J.D. Power suggests price increases between $3,200 and $7,800 per vehicle, depending on model and specifications.
“The American consumer is ultimately paying this tax,” noted Maryann Keller, veteran auto industry analyst, when I called her for perspective. “These tariffs aren’t extracting concessions from foreign governments—they’re extracting dollars from American wallets during a period of already-high inflation.”
Toyota isn’t alone in its struggle. Yesterday I visited Honda’s regional office, where executives described similar forecast revisions. Collectively, Japanese automakers employ over 94,000 Americans directly, with hundreds of thousands more jobs in the supply chain potentially affected by production shifts.
The Treasury Department defended the tariffs in a statement released Tuesday, claiming they would “rebalance trade relationships and create American manufacturing jobs.” However, the Center for Automotive Research estimates that higher vehicle prices could reduce U.S. new car sales by up to 1.3 million units annually, potentially eliminating 150,000 retail and manufacturing jobs.
For Toyota specifically, the company has accelerated plans to shift more production to its U.S. facilities, but such transitions require 18-36 months for retooling and supply chain adjustments. “We can’t simply flip a switch,” explained one Toyota manufacturing executive. “These are complex vehicles with global supply chains developed over decades.”
The trade policy’s timing strikes particularly hard as the industry navigates an expensive transition toward electric vehicles. Toyota had earmarked over $35 billion for EV development, but sources within the company suggest some of these investments may be delayed as resources are diverted to address the immediate tariff situation.
From conversations throughout Tokyo’s business district today, it’s evident that Japanese officials are scrambling to negotiate. The Ministry of Economy, Trade and Industry has requested emergency consultations with U.S. Trade Representative Katherine Williams, but insiders suggest the administration has shown little interest in compromise.
As I prepare to head to Washington tomorrow for follow-up reporting, the question lingering in the air is whether these tariffs represent negotiating tactics or fundamental policy. For companies like Toyota, making billion-dollar investment decisions, the distinction matters tremendously—but answers remain elusive.
What’s clear is that global automotive supply chains built over generations are facing unprecedented pressure to reshape themselves around political rather than economic imperatives, with consequences that will ultimately reach far beyond corporate balance sheets to impact workers and consumers on both sides of the Pacific.
