Honda Motor Co. has projected a significant 70% decline in its net profit for the 2025-26 financial year, citing the heavy toll of US trade tariffs on the global automotive industry. The company estimates a net profit of 250 billion yen ($1.7 billion) for the year ending March 2026, marking a substantial drop from previous levels.
The news follows a similar forecast from Toyota, the world’s largest car manufacturer, which also predicted a 35% year-on-year decrease in net profit due to the impact of tariffs and other factors. Honda specifically pointed to the “tariff impact and recovery efforts,” warning that these would negatively affect operating profit by about 450 billion yen during the year.
The tariffs are a direct result of President Donald Trump’s decision to impose a 25% toll on imported vehicles last month, aimed at boosting the US auto industry. This move has caused significant disruption, especially for Japanese carmakers like Honda, who rely heavily on US exports.
CEO Toshihiro Mibe explained the challenges, noting, “The impact of tariff policies in various countries on our business has been very significant, and frequent revisions are being made, making it difficult to formulate an outlook.”
In its most recent financial year, Honda reported a drop in net profit of almost 25%, falling short of its forecasted figures. The company blamed the decline on reduced sales in key regions like China and Southeast Asia, as well as the increased incentives for electric vehicle (EV) sales in North America.
Despite these challenges, analysts believe that Honda might be better positioned to weather the tariff impact compared to its competitors. This is due to Honda’s substantial manufacturing presence in the US, where over 60% of the vehicles it sells are produced. This gives the company a relatively smaller exposure to the tariff burdens compared to other Japanese automakers.
Furthermore, Trump recently softened the auto tariffs, signing an executive order that allows carmakers a two-year grace period to adjust supply chains back to the US, which could alleviate some of the pressure on Honda in the near term.
While the tariffs remain a significant concern for the global auto industry, Honda’s US production strategy may help buffer the impact as the company adapts to changing trade policies.