TOKYO, Japan: Toyota Motor Corp is bracing for a 21 percent decline in full-year profit, as the impact of President Donald Trump's tariffs and a weaker U.S. dollar weigh heavily on the automaker's bottom line, the company said this week.

Toyota expects operating income to drop to 3.8 trillion yen ($26 billion) for the fiscal year ending March 2026, down from 4.8 trillion yen in the previous year. The automaker attributes the anticipated decline primarily to currency fluctuations, which it states will have the most significant impact, amounting to 745 billion yen.

Tariffs imposed in April and May are projected to cost Toyota 180 billion yen, but the extent of the impact remains unclear, CEO Koji Sato said at a press conference. "Whether these tariffs are permanent or not, and what will happen is not something we can decide," Sato said.

Analysts warn that higher prices could dampen consumer demand in the U.S. market. "Right now, things are very rosy in the U.S. just because customers are panicking and rushing to the market to buy cars. But what happens if these tariffs continue? You need to raise prices," said Christopher Richter, autos analyst at CLSA.

Toyota's operating profit for the three months ending March rose 0.3 percent to 1.12 trillion yen, a modest increase despite the challenging environment.

While vehicle sales in China fell less than those of other Japanese automakers, Toyota has struggled to maintain momentum in the world's largest auto market amid rising competition from Chinese brands.

In North America, its largest market, Toyota reported a more substantial operating loss of 100 billion yen, up from 28 billion yen a year earlier, partly due to a production stoppage at its Indiana plant.

Japan remained Toyota's strongest performer, with operating profit rising 18 percent in the fourth quarter.

Toyota shares closed down 1.3 percent after the earnings announcement, extending earlier losses.