Tariff Impact on Honda’s Bottom Line
Honda has become the latest automaker to face a massive profit hit from President Trump’s tariffs on foreign automobiles and auto parts. In its March 2025 fiscal year report, the Japanese car manufacturer revealed that the tariffs would decrease its FY 2026 operating profit by 650 million yen (approximately $4.4 billion). However, Honda indicated that mitigation efforts would reduce the tariff impact by 200 billion yen, bringing its net loss to around $3.05 billion.
Massive Drop in Operating Profit
As a result of the tariffs and additional currency headwinds, Honda forecast a sharp reduction in its operating profit for FY 2026. The company predicted an operating profit of 500 billion yen ($3.88 billion), a significant drop from the previous year’s 1.34 trillion yen ($9.09 billion). This decrease has caused Honda’s American depository receipts (ADRs) to fall by 4% in midday trading in New York.
CEO’s Statement on Uncertainty
Honda’s CEO, Toshihiro Mibe, expressed concern over the unpredictable nature of tariff policies and their significant impact on the company’s operations. According to Bloomberg, Mibe said, “The impact of tariff policies in various countries on our business has been very significant, and frequent revisions are made, making it difficult to formulate an outlook.”
Production Shifts and Mitigation Efforts
In response to the tariff challenges, Honda announced that it would shift production of its popular Civic hybrid sedan to the United States from Japan. Additionally, the company confirmed that the upcoming 2028 Civic model would be assembled in the U.S. instead of Mexico. These changes are part of Honda’s efforts to mitigate the financial impact of the tariffs.
Challenges Across the Auto Sector
Honda is not alone in facing difficulties due to the tariffs. Other major automakers, including General Motors (GM), Ford, and Stellantis, have also reported significant hits to their bottom lines due to the imposition of these duties. GM estimated a potential $4 billion to $5 billion loss in EBIT, while Ford predicted a $1.5 billion loss. Toyota, in particular, has been severely affected, forecasting a $1.3 billion reduction in operating profits from April and May alone.
Hope for a Trade Deal
Despite the grim financial outlook, Honda and its shareholders are holding out hope for a resolution. The company is awaiting a potential trade deal between Japan and the U.S. that could address the tariffs on automobiles. A recent trade deal with the UK has seen auto import tariffs drop to 10%, a much more manageable rate for automakers like Jaguar Land Rover and luxury brands such as Aston Martin and Rolls-Royce.
EV Battery Plant Delay
In addition to the tariff-related challenges, Honda announced a delay in its electric vehicle (EV) battery plant project in Canada. Due to slowdowns in EV uptake and the impact of tariffs, the company said it would delay the project by two years. This marks another hurdle for Honda as it strives to navigate the evolving auto market.