By Megumi Fujikawa

TOKYO--Honda Motor projected a sharp drop in profit as it expects to be hit by higher U.S. tariffs on foreign-made cars.

The Japanese automaker expects net profit to decline 70% to 250 billion yen, equivalent to $1.68 billion, for the fiscal year ending March 2026. Revenue is forecast to fall 6.4% to Y20.3 trillion, it said Tuesday.

The weak projections come amid rising fears that President Trump's tariffs on foreign cars may hurt one of Japan's most important industries and a major engine of its economic growth.

The auto tariffs will likely weigh on corporate earnings and the overall economy as car exports make up about a third of Japan's shipments to the U.S. That could make companies hesitant to increase capital spending and dent wage growth, which has finally been gathering pace in recent years after decades of virtually zero pay increases.

For the year that ended March 31, Honda's net profit dropped 24.5% to Y835.84 billion, although revenue rose 6.2%.

Other Japanese carmakers are also feeling the pressure of tariffs.

Honda's bigger rival, Toyota Motor, said last week that it expects a 35% drop in net profit this business year. It estimated that U.S. tariffs will cost the company Y180 billion in April and May alone.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

(END) Dow Jones Newswires

May 13, 2025 03:10 ET (07:10 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.