New Tariffs Put Toyota’s 2025 Product Plans in Limbo
Toyota has a big year ahead, with fully two dozen new models set to debut under the Toyota and Lexus brand names. But the Trump administration’s tariffs has left the carmaker in a state of limbo, while a new ruling by a federal trade court has only complicated matters.
The Japanese automaker is stuck in a “wait and see mode,” David Christ, group vice president and general manager of the Toyota Division, told Autoblog during an interview at Toyota headquarters.
Toyota Questions Viability of Entry-Level Models
Under the tariffs announced in April, and formally enacted on May 3, automakers like Toyota face a 25% hit on imported autos and auto parts, potentially putting many products “out of reach for a lot of Americans,” said Mark Templin, executive vice president and chief operating officer, Toyota Motor North America.
How to respond to the new tariffs is a question Toyota is still trying to figure out, Templin and other senior executives told Autoblog. The answer could affect pricing, marketing, and manufacturing plans. Toyota has to rethink whether some base models should remain available in the US.
Toyota Weighs Tariff Fallout
Trying to figure out how to respond to the tariffs is no easy task, as manufacturers have yet to get clear guidance from the White House. The new sanctions are supposed to cover imported autos and auto parts. But how will parts and components that repeatedly cross the border be handled? How will they be applied to parts produced in Mexico and Canada covered by the USMCA trade deal signed during the first Trump administration?
Meanwhile, Trump has signaled he might tweak the auto tariffs. He’s already rolled back duties on imported computers and smartphones, rolled back tariffs on China, and delayed other sanctions.
If those weren’t complicating matters enough, the Court of International Trade on Wednesday ruled that the president didn’t have authority to impose his sweeping tariffs under the International Emergency Economic Powers Act, as Trump claimed. But that ruling has been paused while it’s reviewed by a federal appeals court.
Tariff Confusion Stalls Toyota’s 2025 Strategy
“We need to understand the rules,” one Toyota executive said during a meeting at the automaker’s headquarters in Plano, Texas last week. The new legal twist makes that even more challenging – and makes it more difficult for Toyota to move forward on its plans for the coming year, and beyond.
One big question: is the product roll-out it has scheduled this coming year still viable? Among other things, Toyota has to figure out how much tariffs might add to each of its vehicles – and whether to pass higher prices onto consumers. It may also have to consider whether to shift production of some parts, components and vehicles to avoid or, at least minimize, the impact of tariffs.
Toyota 
Toyota builds roughly 50% of the vehicles it currently sells in the United States at 11 U.S. plants. That climbs to 80% if you include three Canadian and Mexican assembly lines. But even those could be impacted by the new trade sanctions due to their reliance on imported parts and components.
Auto Industry Forecast Slashed as Tariffs Threaten Recession
Last year saw U.S. auto sales nip the 16 million mark for the first time since the pandemic – though that remained well behind the 17.5 million record set in 2016. Nonetheless, the trajectory seemed bound to keep climbing. Toyota’s target for the industry this year was 16.1 million, with some bullish estimates as high as 16.5 million.
But there’s widespread expectation that this will drop sharply should the tariffs remain in effect for an extended period. Cox Automotive now forecasts a figure of around 15 million and as low as 14 million should the new trade sanctions trigger a recession.
Driving Entry Buyers Out of the Market
While Trump has warned automakers not to pass tariff costs onto consumers, Christ said that would be difficult for even the most profitable manufacturers. Rival General Motors, for one, has forecast it could see a $5 billion impact from the new sanctions.
For its part, said Christ, how much it passes on to consumers likely will vary by model line and market segment. For one thing, it needs to see what the competition is doing. No matter what product, “a 25% increase hurts” buyers, he said, though “maybe the higher-end customer has a little more flexibility in their budget than a low-end customer.”
Toyota is particularly vulnerable at the low end, the executive acknowledged, noting that it has six product lines available under $30,000, starting with the Corolla which carries a base price of $22,035. The problem is that for entry-level buyers, even “a 1% increase (in price) could take away 10% of the market” for affordable vehicles, said Jonathan Smoke, chief economist at Cox Automotive, during a meeting of the Automotive Press Association.
Toyota Weighs U.S. Expansion, But New Plants Could Take Years
Toyota’s policy is to build as many vehicles as possible in the markets where they are sold, noted Templin. And it isn’t averse to adding even more capacity.
But that isn’t as easy as simply throwing a switch. “You can’t simply move production facilities overnight,” cautioned Templin. It could take years to see new assembly plants added to the 11 Toyota already operates in the U.S.