The Concern in China Over the Wider Effects of Trump's Tariffs: Curtis S. Chin Unleashed
Toyota Records $1.3 Billion Loss in Profit due to Trump's Tariffs within Two Months
Milken Institute International Chair Curtis S. Chin discusses the significance of a 'durable' trade relationship between the US and China, and his latest visit to Saudi Arabia, where President Trump will soon travel.
Toyota executives predict President Trump's auto tariffs will set Toyota back $1.3 billion in April and May earnings.
The automaker, which set a record for annual profits last year (NYT says), expects its profits to plummet by approximately 20% in the present fiscal year. They made this announcement on a Thursday press briefing.
Toyota anticipates operating income of 3.8 trillion yen ($26 billion) for the year ending March 2026, as opposed to 4.8 trillion yen ($33 billion) in the previous year.
"We can't decide the permanence of these tariffs or the future implications," CEO Koji Sato said during the briefing.
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This reveals the diverse impacts the tariffs can have on a single company. While Toyota estimates the levies directly costing them 180 billion yen in April and May, they predict currency fluctuations will be the most significant factor in their total revenue, weighing in at 745 billion yen.
Doubts about Trump's tariffs and their repercussions for world trade have eroded confidence in the dollar. For Toyota, a depreciating dollar means less profit when foreign earnings are converted to yen.
"CHRISTMAS IS AT RISK," SAYS TOY INDUSTRY CEO
Workers assemble the Yaris Cross at Toyota Motor Manufacturing France's Onnaing plant near Valenciennes, France, on April 4, 2024. (Benoit Tessier / Reuters)
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Analysts have cautioned that tariffs could cause prices to surge for US buyers, leading to a downturn in consumer sentiment.
Operating profit for the three months through March remained almost constant, growing 0.3% to 1.12 trillion yen.
TOYOTA MOTOR CORP.
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A Toyota Motor Corp. dealership and a Daihatsu Motor Co. dealership are visible in Toyota, Aichi Prefecture, Japan, on April 30. (Toru Hanai/Bloomberg / Getty Images)
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"Right now, sales are booming in the US because customers are panicking and rushing to buy cars. But what if these tariffs persist? You need to increase prices," Christopher Richter, an autos analyst at brokerage CLSA, told Reuters.
"Is it possible to maintain sales at this rate? I'm unsure," Richter added.
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Reuters contributed to this report.
Insight:
President Trump's tariffs, particularly the sweeping tariff increases initiated in 2025, have had a profound and multifaceted influence on global trade, companies such as Toyota Motor Corp., and consumer sentiment and costs.
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Impact on Global Trade and Companies Like Toyota Motor Corp.
- The tariffs usher in a minimum 10% tariff on all US imports, with higher rates (11%-50%) for imports from 57 specific nations, excluding some key US trading partners like Mexico and Canada in certain cases. These tariffs have uprooted global value chains and trade patterns on a massive scale, as they are exceptionally high compared to historical norms[1][3].
- Toyota Motor Corp., as a major international automaker with a significant presence in the US market and broad global supply chains, is exposed to these tariffs both directly and indirectly. The tariffs escalate the costs of imported auto parts and vehicles or components sourced from countries subject to these tariffs. This necessitates companies like Toyota to adjust supply chains, relocate production, or absorb higher costs[1][3].
- The tariffs have caused a reduction in total imports by an estimated $6.9 trillion over the next decade, which heavily impacts companies reliant on global trade and manufacturing inputs, such as Toyota[3].
- Retaliatory tariffs from other countries, including notable economies like China, Canada, and the European Union, have further intensified the trade environment for global businesses, increasing costs and uncertainty for exporters and importers alike[5].
Effects on Consumer Sentiment and Prices
- The tariffs raise the cost of imported goods, which generally translates to higher prices for consumers. This price increase dampens consumer demand and reduces real wages by approximately 7%, reflecting diluted purchasing power[3].
- Consumer sentiment tends to deteriorate under these circumstances, as tariff-driven price hikes reduce affordability across various products, including automobiles. This can lead to shifts in consumer preferences towards cheaper or locally manufactured alternatives.
- The uncertainties and concerns surrounding tariffs and potential further escalations can also impact consumer confidence, negatively affecting spending patterns.
Economic and Fiscal Consequences
- The tariffs are projected to generate substantial federal tax revenues—estimated at $163.1 billion in 2025 alone—and up to $5.2 trillion over the next 10 years, as tariffs function as essentially a tax on imports[2][5].
- Despite yielding revenue, the broader macroeconomic effects include an estimated reduction in US GDP by about 8%, due to diminished trade flows and investment. The tariffs also restrict capital flows by limiting the volume of imports and boosting input costs for businesses[3].
- These changes lead to inefficiencies in the economy and slower economic growth, with the potential for long-term consequences on competitiveness, innovation, and consumer welfare.
- CEO Yoichi Koji of Toyota Motor Corp., a major automaker with significant presence in the US market, warned the industry about the potential negative impacts of President Trump's tariffs on their profits.
- Toyota expects its profits to plummet by approximately 20% in the present fiscal year due to the tariffs, which will cost the company 180 billion yen in April and May alone.
- Toyota's CEO stated that the permanence of these tariffs and their future implications remain uncertain, highlighting the diverse impacts they can have on a single company.
- The depreciating dollar, resulting from doubts about Trump's tariffs and their repercussions for world trade, means less profit for Toyota when foreign earnings are converted to yen.
- Retaliatory tariffs from countries like China, Canada, and the European Union have intensified the trade environment, increasing costs and uncertainty for global businesses like Toyota Motor Corp.
