Japanese Automakers Losing $20 Million Per Day To U.S. Tariffs

Japanese automakers are losing an estimated 3 billion yen ($20.3 million) in combined profits every day the U.S. delays lowering auto tariffs, according to company data, according to Nikkei Asia.

The full-year hit from the duties is projected at 2.7 trillion yen ($18.3 billion), dragging aggregate operating profit down 36% for six major producers, excluding Nissan, which has not given a forecast.

The U.S. raised tariffs on Japanese vehicles to 27.5% from 2.5% in April but agreed last month to cut the rate to 15%. Goldman Sachs Japan estimates the reduction will lessen the damage by 1.6 trillion yen, but each month of delay adds roughly 100 billion yen to automakers’ burden, Nikkei reports.

Mazda, which gets about one-third of its sales from the U.S., expected an 82% drop in net profit to 20 billion yen this fiscal year, assuming the lower rate would start Aug. 1. With tariffs estimated to cost 233.3 billion yen, it aims to offset the blow with 80 billion yen in cost cuts, but further delays could push it into the red. Subaru, with 70% of its sales in the U.S., forecasts a 210 billion yen hit and a 51% drop in operating profit to 200 billion yen.

Nikkei Asia writes that Toyota projects the biggest loss—1.4 trillion yen—due to high U.S. sales and supplier costs. Its forecast also assumed an Aug. 1 start date. In July, Toyota raised U.S. prices by an average $270, citing “the improved performance of the vehicles rather than the tariffs.” Takanori Azuma, chief officer of Toyota’s accounting group, said there could be further hikes “if there is an appropriate time when customers can accept them.” Toyota now expects pricing changes to lift earnings by 370 billion yen, up from 250 billion, but far below the tariff impact.

Price hikes carry risks. A rush of pre-hike buying may slow sales later, and higher prices could weaken competitiveness. “We continue to consider [price hikes] cautiously,” Honda CFO Eiji Fujimura said. Mitsubishi Motors, which raised prices in June, still posted a 3 billion yen operating loss in North America last quarter, with a 14.4 billion yen tariff drag.

If prices can’t fully offset the duties, automakers must cut costs. Toyota expects savings, higher sales volume, and a better model mix to add 899.5 billion yen to operating profit.

Japan’s lead trade negotiator, Ryosei Akazawa, said he expects the U.S. to lower the tariff rate when Washington corrects its “reciprocal” tariff order. Asked when, he said the two sides “tacitly share an understanding that it’d be best to do it quickly.”