Daikin Faces U.S. Tariff Pressures but Keeps Profit Outlook Strong

Japan’s air-conditioning giant absorbs billions in tariff impact through price hikes, cost cuts, and supply chain adjustments.

In Japan, Daikin Industries has reassessed the effect of U.S. tariff measures on its fiscal year ending March 2026. Initially, the company estimated a direct hit of about 47 billion yen ($320 million) to operating profit, but recent recalculations suggest the impact will be slightly lower. Daikin stated that this loss will be fully absorbed through a mix of price increases, cost-cutting, and flexible sourcing strategies.

The newly announced U.S. tariffs cover a wide range of products:

• 54% tariffs on Chinese goods, along with 30–35% tariffs on parts from Mexico and Canada.
• 50% tariffs on food, aluminum, and steel.
• Finished products from China and Canada are also targeted, while finished goods produced in Mexico that meet USMCA requirements are exempt.

For Daikin’s U.S. subsidiaries, the effect varies. DNA Corporation faces higher costs on finished units imported from Japan, Asia, and Europe, while locally produced units still rely on Asian parts. DAA Corporation also sees tariff-related costs on appliances imported from Europe. In addition, Daikin’s chemical and oil machinery businesses are exposed, as they source materials from Japan, China, Europe, and Asia.

Beyond direct costs, Daikin is preparing for indirect risks such as:

• Retaliatory tariffs and changes in trade policies,
• Disruptions in the global supply chain,
• Reduced consumer demand due to higher prices,
• Slower corporate investment,
• And a potential slowdown in global economic growth.

To mitigate these risks, Daikin is accelerating product development, investing in differentiated products, and reallocating resources toward stronger regions and growth areas. It is also ready to review its investment plans and cut expenses if conditions worsen.

The company emphasized that while tariff policies may continue to shift, its core strategy remains unchanged: adapt swiftly, pass on costs when possible, and streamline operations. This resilience not only secures Daikin’s short-term performance but also strengthens its long-term position as a global leader in climate and energy-efficient solutions.

Explanation of Key Terms

• Tariffs: Taxes imposed on imports that raise costs for companies but can sometimes be offset by pricing strategies or supply chain adjustments.
• USMCA (United States–Mexico–Canada Agreement): A trade agreement that allows tariff exemptions for goods meeting specific regional content rules.
• Indirect Impact: Broader economic effects such as reduced consumer demand or supply chain disruptions that go beyond immediate cost increases.

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