TOKYO – Toyota (7203.T) raised its full-year operating profit forecast on Wednesday, betting that strong performance in markets outside the United States will help offset the impact of U.S. import tariffs. The world’s top-selling automaker now expects operating profit of 3.4 trillion yen ($22.6 billion) for the fiscal year ending March 2026, a 6% increase from its previous forecast of 3.2 trillion yen.

The company estimates that U.S. tariffs will cost it 1.45 trillion yen this financial year. Despite these challenges, Toyota’s sales and profitability in markets such as China, Europe, Asia, Africa, and India remain “solid,” according to Chief Financial Officer Kenta Kon.

“North America is facing a very tough situation due to tariffs,” Kon said during a results briefing. Toyota’s North American operations swung to a 134 billion yen loss for the first half of the year, even as vehicle demand remained strong and inventories tightened.

Toyota cited several factors for its improved full-year outlook, including a weaker yen, higher sales volumes, and cost-reduction initiatives. Deputy CFO Takanori Azuma highlighted India’s growing contribution to profits, helping to offset the strain in the U.S., contrasting with a decade ago when nearly half of Toyota’s profits came from North America.

For the latest quarter, Toyota’s operating profit fell 27% to 839.6 billion yen, below analysts’ expectations of 863.1 billion yen, marking its second consecutive quarterly decline.

Production of Toyota and Lexus vehicles grew 6% to nearly 5 million units in the first half of the fiscal year, driven by double-digit sales growth in the United States. Despite the positive forecast, Toyota shares fell 3.65% on Wednesday, underperforming the Nikkei 225 (.N225), which lost 2.5%.