Flip-Flopping U.S. Trade and Environmental Policies Could Cost Japanese Automakers $40 billion

• Japanese automakers have already lost $28 billion due to rapid changes in import tariffs and EV subsidies.

• These costs are forecast to reach U.S. $40 billion in March 2027 if the current trend continues.

• Toyota is most affected, having had to pay $17.22 billion in tariffs alone.

Trade and environmental policy changes enacted by the Trump administration over the last year and a half could cost Japanese automakers $40 billion.

Indeed, data compiled by Automotive News shows that these companies have already lost $28 billion since January 2025 as a direct result of decisions taken by the Trump Administration.

The bulk of this cost is of course trade tariffs that were imposed on almost every country on earth, including Japan itself, but also Canada and Mexico, where Toyota, Honda, and Nissan manufacture vehicles for the American market.

In fact, Toyota is reported to have paid $17.22 billion in tariffs alone, while Honda forecasts costs at $15.23 billion.

Nissan only expects to pay about $3.12 billion in tariffs, which is explained by its strong manufacturing presence in the United States, where its most popular models are made for the American market.

Just for the 2025 fiscal year, the six Japanese automakers operating in the United States (Toyota, Honda, Nissan, Mazda, Subaru, Mitsubishi) have put their tariff costs at $15.23 billion.

Despite these companies taking action to reduce their tariff load, such as by halting the importation of some foreign-made models and boosting U.S.-based production, they forecast a further $11.98 billion charge for the 2026 fiscal year.

Tariffs are not the only way in which the Trump administration has cost money, as a rollback on EV incentives and environmental regulations have also caused headaches for Japanese automakers.

Indeed, these companies were among the slowest to adopt electrification, but had just committed billions to develop new electric vehicles from scratch for the North American market due to favourable prospects.

Upon his return to office, Donald Trump and his government have cancelled Biden-era EV tax incentives and loosened tailpipe emissions requirements, which led to a sharp drop in EV sales in 2025.

Because of this, Japanese automakers find themselves in a position where they have invested substantial sums into a technology that now doesn’t seem to have a potential for profitability, at least for many years.

This has led them to reverse course and focus on hybrids instead, taking a massive hit in the process.

For example, Honda abandoned all of its current plans for electric vehicles in favour of launching numerous new hybrid models in the coming years, writing off $9.05 billion and marking its first annual loss since going public almost 70 years ago.

The automaker also expects a further $3.12 billion in EV-related charges for the current fiscal year, despite it having no electric model of its own to offer once the GM-developed and manufactured Prologue retires at the end of the year.

Subaru has also taken a $360.7 million hit as it chose to push back the launch of its in-house EVs and rely on Toyota-based models for a while longer.

Nissan is also making an EV related loss, but it hasn’t specified the exact amount, including it in a $2.25 billion impairment.

Interestingly, the loosening of tailpipe emissions rules has also cost some Japanese automakers money.

Indeed, the Trump administration stopped penalizing automakers for not adhering to the Corporate Average Fuel Economy (CAFE) rules, which makes redundant the emissions credits purchased in advance by Subaru and Mitsubishi.

The former apparently spent $125.4 million on these credits, while the latter spent $100.5 million.

Nissan and Mazda are luckier as they hadn’t yet purchased emissions credits before the penalties were waived, which means they can inject the sums they had set aside back into their operating budget. While we don’t know how much this will benefit Mazda, Nissan had previously expected to pay $642.8 million in U.S. emissions credits.

Given the volatile nature of the current American administration and the impending mid-term elections, which could mark a shift back toward the previous normal in terms of trade relations, Japanese and European automakers are not out of the woods when it comes to navigating regulatory hurdles.

Source: Automotive News