Honda Motor reported a 50% drop in first-quarter operating profit on Wednesday, citing the impact of US President Donald Trump's tariffs and a stronger yen. Japan's second-largest carmaker posted operating profit of 244.2 billion yen ($1.66 billion) for April-June, falling more than a fifth short of the average analyst estimate of 311.7 billion yen.
The company attributed the decline to steep US tariffs on auto imports, which now stand at 27.5% following a 25% levy imposed in April. Honda said these tariffs reduced its quarterly operating profit by approximately 125 billion yen.
Despite the weak quarter, Honda raised its full-year operating profit forecast to 700 billion yen from 500 billion yen, citing a smaller-than-expected tariff impact. The company now expects a 450 billion yen hit from tariffs for the year, down from a previous estimate of 650 billion yen.
Honda's reliance on the US market has grown significantly, with the US accounting for 41% of global sales in the first half of 2025, up from 37% in 2024 and 26% in 2022. The company builds most of its US-bound cars in Canada and Mexico, benefiting from USMCA trade exemptions.
The carmaker also revised its yen exchange rate assumption to an average of 140 yen per dollar, five yen weaker than its earlier forecast. Additionally, Honda recorded a one-time expense of about 113 billion yen related to electric vehicles.
