Donald Trump’s tariff policies have already resulted in a loss of $11.8 billion for major global automobile manufacturers, and the losses are expected to grow, the Wall Street Journal (WSJ) reported on the 7th.
The WSJ based its report on the recent second-quarter earnings announcements from global car manufacturers. Toyota, the world’s leading auto seller, revealed that tariffs imposed by the U.S. negatively impacted their operating profit in the second quarter by reducing it by $3 billion. Toyota had the largest loss among major global car companies.
Volkswagen followed with losses of $1.51 billion, GM at $1.1 billion, Ford at $1 billion, Honda at $850 million, BMW at $680 million, Hyundai at $600 million, Kia at $570 million, Mazda at $470 million, and Nissan at $470 million. The impact of Trump’s tariffs on the Hyundai group this quarter reached $1.17 billion.
It is anticipated that the net profit of the top 10 global automobile manufacturers, excluding China, will decrease by about 25% compared to the previous year.
WSJ pointed out that the reason car manufacturers’ profits are directly hit by the tariff increase is due to the rise in costs that are hard to pass onto consumers through product price hikes or to shift production facilities outside of the U.S. back to it, both of which are challenging to achieve in the short term.
Indeed, Toyota estimates that by the end of the current fiscal year in March, tariff-related impacts will amount to $9.5 billion, with annual net profit expected to decrease by 44% compared to the previous year.
The relocation of production bases within the U.S. is also likely to proceed slowly. Most manufacturers tend not to produce the same model in more than two factories for production efficiency, and there is a cautious approach to investing heavily in new production facilities amid political uncertainty that could change again in the future, as analyzed by WSJ.
Even if manufacturers decide to expand their production facilities in the U.S., WSJ analyzed that this decision is mainly due to strong demand in the U.S. market.
The article concludes that automakers have been aiming to expand production in the world’s largest automobile market, the U.S., regardless of tariffs.