Toyota Motor Corp. is stepping in to shield its North American suppliers from the brunt of President Donald Trump’s new tariffs on imported auto parts, as the world’s largest automaker moves to preserve its supply chain amid growing trade tensions.
The Trump administration imposed an additional 25% tariff on all imported vehicles last week, with major components such as engines and transmissions to face the same duty starting May 3. Under pressure to maintain its competitiveness in the crucial American market, Toyota has informed major suppliers it will help cover increased costs on parts imported from Mexico and Canada to the U.S.
The Japanese automaker’s U.S. assembly plants in Kentucky and Indiana produced 1.27 million vehicles last year, representing 13% of Toyota’s global production. These facilities rely heavily on a network of suppliers that import materials from across North America.
While specific terms of the assistance remain under negotiation, Toyota has told its Japanese suppliers it will “maintain current operations” for now, prioritizing supply chain stability over immediate price hikes. The company plans to absorb tariff impacts through cost cutting and efficiency improvements rather than raising vehicle prices.
Other automakers are taking different approaches, with Stellantis reducing U.S. factory staff and suspending assembly lines in Mexico and Canada, while Ford has announced discounts on various models. General Motors is shifting more pickup production to Indiana while scaling back Mexican operations.
Goldman Sachs estimates that if Toyota were to raise prices instead, its U.S. sales volume could decrease by 5% to 8%, potentially reducing annual operating profit by ¥340 billion ($2.34 billion).
