Toyota Motor expects a 1.4 trillion yen ($9.5 billion) hit to operating profit for the fiscal year ending March 2026 due to higher U.S. import tariffs, according to Nikkei Asia.

The automaker revised its net profit forecast downward by 14% to 2.6 trillion yen, citing the new 25% duty imposed on Japanese car imports in April by U.S. President Donald Trump.

Previously, Toyota had only factored in the impact of tariffs for April and May—estimated at 180 billion yen. The company's net profit for the April–June quarter fell 36.9% year-on-year to ¥841 billion, reflecting both the stronger yen and the increased U.S. tariff rate.

“The [U.S. tariff] has risen to 15% from the previous 2.5%, which obviously has a significant impact,” said Takanori Azuma, Toyota’s chief accounting officer. “And it is a thing we are not able to control. The major challenge is to ensure that our North America business generates solid profits. The result [of a trade deal] remains tough."

Azuma added that Toyota is exploring countermeasures. “If there is excess production capacity in the U.S., we will make use of it. ... We want to refine our operations by considering every possible scenario.”

In June, Toyota raised U.S. prices by an average of $270 on new vehicles built after July 1. “We'll consider adjusting prices if there is an appropriate timing which is acceptable to our customers,” Azuma said.

Despite the tariff pressure, Toyota's global sales rose 7% in Q1 to 2.4 million units, including a 12.7% increase in North America and 11.4% in Japan. North America remains Toyota’s largest market, accounting for 33% of total sales.

The U.S. recently agreed to lower tariffs on Japanese cars from 27.5% to 15%, with the new rate expected to take effect in August. Even after the 25% tariff was imposed in April, Toyota continued to increase U.S. exports: 41,573 units in May (+22.9%) and 52,745 units in June (+15.9%).

First-quarter operating profit dropped 10.9% to 1.1 trillion yen, while net sales rose 3.5% to 12 trillion yen. Tariffs alone reduced operating profit by 450 billion yen. Currency fluctuations are expected to further cut profits by 725 billion yen, with rising material costs subtracting another 300 billion yen.

Nikkei writes that Toyota is aiming to offset these hits through increased sales, cost cuts, and growth in parts and financial services. The automaker kept its net sales forecast unchanged at 48.5 trillion yen.

Meanwhile, the company announced plans to build a new manufacturing plant in Toyota City, Aichi Prefecture, with operations starting in the early 2030s. Investment details are still under wraps. “Our top priority is to maintain the production base of 3 million vehicles in Japan,” Azuma said. “This is the foundation of Toyota's business... We want to work together to protect it, including through measures to stimulate domestic demand."

Other Japanese automakers are also struggling with the tariff impact. Honda posted a Q1 operating loss of 29.6 billion yen due to U.S. tariffs and weak China sales. Mazda reported a 46 billion yen loss. Both companies are shifting focus to expand U.S. production and reroute exports from Japan.