Hondas profits halved amid tariff struggles and electric vehicle losses

Honda, Japan’s second-largest automaker, has reported a dramatic 50 percent slump in its quarterly profits, citing the ongoing impact of Donald Trump’s vehicle tariffs and challenging conditions in the electric vehicle sector. The manufacturer disclosed that operating profits for the quarter fell to 244bn yen (£1.2bn) in the three months leading up to June, with a 124bn yen tariff expense and 113bn yen loss attributed to electric vehicle sales in the United States.

The disruption to Honda’s profitability underlines the turmoil brought about by US trade policies. As part of a sweeping tariff initiative, Trump imposed 25 percent duties on all imported vehicles in March, causing the total tariff rate on imports from major automotive nations such as Japan to hit 27.5 percent. While a recent framework agreement with Japan will see the headline tariff capped at 15 percent, manufacturers like Honda continue to face significant additional costs due to transnational supply chains and heavy reliance on plants in Canada and Mexico.

Honda produces vehicles globally but remains particularly dependent on North American production hubs, especially Canadian and Mexican operations, for automotive deliveries to the US market. The company now projects a total tariff-related burden of 450bn yen for the financial year ending March 2026. This figure, while lower than the previously estimated 650bn yen, still represents a formidable hit to the bottom line. The lesser impact has been mitigated in part by Honda’s ability to increase prices in the US, a move reflective of the broader inflationary pressures now evident in the industry.

Despite these headwinds, sales in North America remained robust outside the effects of tariffs. The true challenge has emerged in the sphere of battery electric vehicles. Honda has acknowledged significant losses on its US electric car sales, also undertaking write-offs linked to investments in new electric vehicle development. This comes as the automotive sector increasingly pivots towards hybrids, seen as a safer commercial bet than pure electric models amid shifting consumer demand and regulatory pressures.

The wider auto industry continues to navigate the fallout from tariffs and evolving trade agreements, with both international and domestic firms grappling with the costs of fragmented supply chains and unpredictable trade policy. Trump has dismissed concerns that higher tariffs may raise prices for US consumers, a stance that has contributed to inflationary dynamics and complicated decision-making for central bankers and manufacturers alike.

Honda’s experience typifies the pressures facing global automakers as they contend with not only policy-induced costs, but also the technological transition towards electric mobility. The coming months are likely to remain turbulent as the sector adapts to policy uncertainty and shifting market fundamentals.