Published by Global Banking & Finance Review®
Posted on August 5, 2025
3 min readLast updated: January 22, 2026
Add as preferred source on GoogleToyota and Honda face profit declines due to US tariffs and a strong yen. Both companies are focusing on hybrid models to mitigate impacts.
By Daniel Leussink
TOKYO (Reuters) -Toyota Motor and Honda Motor are expected to report weaker first-quarter earnings this week, as U.S. import tariffs and a stronger yen weigh on profits despite solid demand for hybrids in their biggest overseas markets.
Japanese automakers face growing uncertainty in the U.S., where tariffs on imports are pushing up vehicle prices and testing the resilience of consumer demand. Investors will be watching for clues on how Japan's two largest automakers are offsetting such burdens.
Toyota, the world's top-selling automaker, is forecast to post a 31% year-on-year drop in operating profit to 902 billion ($6.14 billion) yen on Thursday, according to the average estimate of seven analysts polled by LSEG. That would mark its weakest quarterly result in more than two years.
Honda is expected to report a 36% decline in operating profit to 311.7 billion yen on Wednesday, its second straight quarterly drop. The automaker has already forecast a 59% fall in full-year profit.
Both companies face the prospect of 15% tariffs on Japanese auto imports into the U.S. from levies totalling 27.5% previously, following a bilateral trade deal last month.
Other Japanese automakers and suppliers have also flagged weaker earnings, citing the same pressures from tariffs and the stronger currency compared to the same period a year ago.
"The first quarter is going to be a rough one for Toyota," said Christopher Richter, autos analyst at CLSA. "Things should get easier going forward," he said, citing some relief from the lowered tariffs.
Particularly Honda's reliance on the U.S. has deepened in recent years as sales in other regions falter. Outside of the U.S., both companies produce key models for the U.S. market in Canada and Mexico.
For Honda, the U.S. accounted for around two-fifths of total sales in the first half of the year. Its global sales fell 5% over the period, dragged down by double-digit declines in China, Asia and Europe.
Toyota's global sales rose 6% over the period supported by strong demand for petrol-electric hybrids which typically carry higher margins than conventional petrol cars. Its Camry and Sienna hybrids remain strong sellers in the U.S.
The company has also performed better in China in recent months, posting a 7% year-on-year increase in vehicle sales over the first half of the year.
Honda said in May that it was scaling back its investment in electric vehicles given slowing demand and would be focusing on hybrids with various revamped models. It had earlier delayed plans to build an EV production base in Canada due to slowing demand for electric cars.
Investors will be looking for updates from both companies on their pricing strategy and any revisions to full-year forecasts.
The Japanese automakers have been taking measures such as transfer pricing to help alleviate the burden from the import tariffs, CLSA's Richter said.
Shares of Toyota are down 16% so far this year, while those of Honda are flat.
($1 = 146.8900 yen)
(Reporting by Daniel Leussink; Editing by Stephen Coates)
Toyota is forecast to post a 31% year-on-year drop in operating profit to 902 billion yen.
U.S. import tariffs are pushing up vehicle prices, impacting consumer demand and profits for Japanese automakers.
The U.S. accounted for around two-fifths of Honda's total sales in the first half of the year.
The Japanese automakers have been implementing strategies like transfer pricing to help alleviate the burden from the import tariffs.
Honda announced it is scaling back its investment in electric vehicles due to slowing demand and will focus on hybrids with revamped models.
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