^{Photo: Bloomberg.com}

Toyota Motor Corp. reported a disappointing performance for the September quarter, with profits falling short of analyst expectations for the second consecutive time. The decline comes as ongoing U.S. tariffs continue to weigh heavily on Japan’s largest automaker, even as global vehicle demand remains strong.

Toyota posted revenue of 12.38 trillion yen (approximately $81 billion), surpassing market forecasts of 12.18 trillion yen. However, operating profit came in at 834 billion yen, missing the LSEG consensus estimate of 863.1 billion yen. The automaker’s quarterly profit dropped 28% year over year, marking its sharpest decline since early 2020, while overall revenue still managed an 8% increase compared to the same period last year.

Tariffs Take a Toll on Exports

The latest results highlight the toll of Washington’s “reciprocal” tariff measures, first imposed in April under President Donald Trump’s trade policy shift. Though Tokyo secured a revised agreement with the U.S. in July, lowering tariffs on Japanese automobiles from 25% to 15%, the damage has already been significant.

Since the tariffs took effect on August 7, Japanese car exports to the United States have plummeted. In September, the value of automobile shipments fell 24.2% year-on-year, slightly better than the 28.4% drop recorded in August, but still indicative of a steep contraction in one of Toyota’s most profitable markets. Analysts note that even with reduced tariffs, Japanese automakers face higher logistics costs and thinner margins due to supply chain adjustments and fluctuating exchange rates.

Global Sales Remain a Bright Spot

Despite the tariff headwinds, Toyota continues to show strength in global markets. From April to September, the company sold 5.3 million vehicles worldwide, up 4.7% from the previous year, thanks largely to solid demand in Asia and Europe and the rising popularity of hybrid and electric models. The brand’s luxury division, Lexus, also reported record sales during the period, driven by demand for the RX and NX series.

The company’s financial report for the six months ending September revealed steady growth in regions outside North America, cushioning some of the losses from the U.S. market. Toyota executives noted that the company’s supply chains have stabilized after pandemic disruptions, allowing production to rebound to near pre-2020 levels.

Analysts Weigh In on Outlook

Industry analysts believe Toyota’s short-term profitability will remain under strain as tariffs and currency fluctuations persist. The yen’s recent depreciation—hovering near 151 per dollar, a 34-year low—has benefited export competitiveness but also raised input costs for imported parts and raw materials.

“Toyota is caught in a delicate balance,” said an analyst at Nomura Securities. “While global demand is strong, pricing pressures in the U.S. and the cost of absorbing tariffs continue to erode margins.”

Still, Toyota’s long-term fundamentals remain strong. The automaker is investing heavily in electrification, with plans to roll out 10 new EV models by 2026. The company also aims to boost its annual electric vehicle sales to 1.5 million units by 2026, positioning itself as a major competitor in the global EV race.

The Road Ahead

Looking forward, Toyota executives expect moderate recovery in the coming quarters if trade tensions ease. The Japanese government is reportedly negotiating further tariff reductions, hoping to stabilize automotive exports to the U.S.

While the company’s immediate financial outlook remains cautious, Toyota’s consistent global demand, extensive hybrid lineup, and aggressive EV push may help it weather the tariff turbulence.

For now, however, the automaker’s struggle underscores how global trade policies continue to reshape the fortunes of even the most resilient industrial giants.