By Megumi Fujikawa
TOKYO--Two major Japanese automakers have warned that earnings will be hit hard by U.S. tariffs, underlining the risk of an industry-wide downturn that could stunt Japan's economic recovery.
Honda Motor and Nissan Motor both expect multibillion-dollar blows from the tariffs on foreign-made cars imposed by the Trump administration in April, they said Tuesday as they reported earnings and gave dim guidance for the year ahead.
Honda expects its net profit to drop 70% to 250 billion yen, equivalent to $1.68 billion, for the year ending March 2026. Nissan refrained from offering annual profit projections due to tariff uncertainty, but guided for a Y200 billion operating loss for the April-June quarter.
Speaking at a news conference, Honda Chief Executive Toshihiro Mibe said the company has already started looking at ways to boost production capacity in the U.S. in case tariffs remain in place for a long time.
The weak projections come amid rising fears that President Trump's auto tariffs may hurt one of Japan's most important industries and a major engine of economic growth.
The tariffs will likely weigh on corporate earnings and the overall economy as car exports comprise about a third of Japan's shipments to the U.S. That could make companies hesitant to increase capital spending and dent wage growth, which has finally been gathering pace in recent years after decades of virtually zero increases.
Honda said it expects U.S. tariffs to reduce its operating profit by Y650 billion this fiscal year. CEO Mibe said the company increased stockpiles in the U.S. through March to avoid the tariffs, and plans to shift production of some of its models, including the Civic, to America.
"We believe that conducting business under a free-trade environment is the best solution not only for Mexico and Canada, but also for the American automotive industry," Mibe said.
A large portion of Honda cars sold in the U.S. are imported from Canada and Mexico.
Nissan also expects the tariffs to increase costs by up to Y450 billion this fiscal year, affecting 300,000 units produced in Mexico and 120,000 vehicles made in Japan--nearly 45% of all its cars sold in the U.S.
Other Japanese carmakers are also feeling the pressure.
Toyota Motor said last week that it expects a 35% drop in net profit this business year. It estimated that U.S. tariffs will cost the company Y180 billion in April and May alone.
In addition to the tariff impact, Nissan is facing internal challenges.
Nissan said Tuesday that it plans to reduce headcount by 20,000, more than double what it had originally planned. The layoffs are part of cost-cutting efforts to turn around weak sales.
The automaker is in urgent need of restructuring after a merger with Honda was scrapped in February. The deal fell through when Honda sought to make Nissan a subsidiary to facilitate decision-making, after initially agreeing to a structure in which the two automakers would sit side-by-side under a single holding company.
"The reality is clear: we have a very high-cost structure," said Nissan CEO Ivan Espinosa. "To complicate matters further, the global market environment is volatile and unpredictable, making planning and investment increasingly challenging."
Write to Megumi Fujikawa at megumi.fujikawa@wsj.com
(END) Dow Jones Newswires
05-13-25 0713ET
