According to Nikkei Automotive, the Trump administration’s additional tariff policies severely blow Toyota’s global production system. With Toyota’s high reliance on U.S. exports, the automaker faces a crisis that could disrupt its domestic production systems.
The report reveals that Toyota annually exports about 530,000 vehicles to the U.S. With U.S. local production at around 1.27 million units—only half of its total—Toyota still heavily depends on imports from Japan, Canada, and Mexico.
Japan’s supply chain encompasses about 60,000 parts manufacturers. A decline in U.S.-bound exports threatens performance metrics and jeopardizes the entire “3 million vehicle domestic production system.” The Lexus brand comprises about 20% of vehicles exported from Japan to the U.S., with higher-end models feeling the brunt of the tariff impact.
In preparation for the 2024 U.S. presidential election, Toyota has launched a tariff response project and conducted simulations. However, the complexity of reciprocal tariffs has made effective responses challenging. Nikkei analysts assert that “the Trump administration’s unpredictable policy shifts are shaking the very foundations of Japan’s automotive industry.”
Toyota is absorbing the tariff costs and plans to maintain U.S. sales prices in the short term. However, industry experts warn manufacturers will inevitably face mounting costs in the long run.
Toyota has structured its sales portfolio around high-profit models such as Lexus and hybrid vehicles, offering half the industry average incentives. This strategy aims to absorb tariff costs without price hikes, even as some competitors have already increased prices.
Goldman Sachs Group, Inc. forecasts that tariffs will cause a 5-8% drop in Toyota’s U.S. sales and slash operating profits by 340 billion JPY (approximately $2.3 billion) for the fiscal year. While relocating to the U.S. has been discussed, significant production increases during Trump’s term seem unrealistic.
With most Lexus models manufactured in Japan, expanding local production or reducing U.S. sales could directly impact Japanese production volumes. This ripple effect will likely send shockwaves through Toyota’s parts suppliers and the broader Japanese supply chain.
The auto industry has been built on a global free trade system, but the Trump administration’s tariff policies fundamentally undermine this premise. Industry experts warn that this could lead to widespread disruptions across the entire industrial landscape, extending far beyond the automotive sector.
