World’s Biggest Carmaker Sees 21% Profit Decline As Tariffs Take A Bite

Toyota, the world’s leading carmaker, is steering into challenging terrain for the upcoming fiscal year.

In its recent financial outlook, Toyota announced that it expects a 21% drop in operating profit for the fiscal year ending March 2026. The company projects earnings to fall to 3.8 trillion yen ($26 billion) from 4.8 trillion yen recorded in the prior year. This projection aligns closely with analysts’ consensus of 4.75 trillion yen, according to data from LSEG.

A key source of this anticipated dip is geopolitical tension, especially U.S. tariffs introduced under President Donald Trump, which threaten not only Toyota’s American exports but also the broader consumer sentiment across major markets. Toyota noted, “Price rises can lead to a decline in consumer sentiment,” capturing the delicate balance it must maintain amid rising costs.

Another blow to profitability comes from the strengthening Japanese yen, which erodes overseas earnings when converted back to yen. On top of that, Toyota is grappling with rising material costs and looming investment pressures, particularly in its U.S. operations. Should the company expand its production footprint in America, it may also need to accommodate higher labor costs, further tightening margins.

In the fiercely competitive Chinese auto market currently the world’s largest Toyota has managed to fare slightly better than its domestic rivals. However, the brand still faces an uphill battle, struggling to counter a persistent sales decline. The onslaught of local Chinese brands has proven formidable, putting continued pressure on the Japanese automaker’s market share.