HONG KONG, Aug 8 (Reuters Breakingviews) - Efforts to quantify U.S. President Donald Trump's tariff hit on automakers feel like a bad joke. Japan's Toyota Motor (7203.T), opens new tab and Honda Motor (7267.T)
, opens new tab now expect more than a $12.5 billion impact combined for the year. But moving parts and shifting assumptions mean those forecasts could easily change again. That makes decisive action, such as raising prices, harder to commit to.
On Wednesday, Honda raised its operating profit forecast to 700 billion yen ($4.76 billion) for the twelve months to March 2026 - still some 40% below last year's earnings - as U.S. tariffs on Japanese goods came in lower than feared. Larger rival, the $237 billion Toyota, on Thursday also offered its estimates for the current period and now expects annual operating profit to fall by a third. Shares of both automakers barely reacted on the news, implying the impact of U.S. tariffs, while painful, was largely in line with expectations.
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Problem is, the companies - and investors - are filling in some big blanks to come up with these projections. The U.S.-Japan trade agreement, which pinned the tariff on auto imports from the Asian country at 15%, down from 27.5% previously threatened, isn’t yet laid out in writing, so the fine print might change. Honda assumes the new rates will kick in from September, while Toyota’s calculations assume August. Both also input a 25% levy for completed cars from Canada and Mexico, where they each manufacture a significant portion of their U.S.-bound vehicles, plus exemptions for parts imported from those regions. Those too may change: U.S. Commerce Secretary Howard Lutnick said last month that the president is “absolutely” going to renegotiate the United States–Mexico–Canada agreement.
That makes responding to tariffs - whether by tweaking production lines, shifting supply chains or raising prices - extra perilous. Honda is considering steps like ramping up U.S. production capacity by adding factory shifts, per management, or outsourcing to Nissan Motor's (7201.T)
, opens new tab stateside facilities, according to reports from the Nikkei. But that would probably result in higher manufacturing costs and increase the urgency to find alternative sources for key Japan-made components such as batteries and motors. It's understandable CEO Toshihiro Mibe wants to take his time before taking the plunge.
Meanwhile, Toyota has stayed quiet on tariff-induced price hikes, which are not factored into its guidance. In fact, most industry peers have opted to stand put in the first half this year: first movers risk losing market share, or even incurring
, opens new tab Trump's wrath. And once a company commits to higher prices, it's extremely difficult to reverse.
The only certainty is that the latest forecasts and the assumptions underpinning them can’t be taken too seriously. That leaves carmakers and shareholders driving with big blind spots.
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