Trump tariffs take $1.4 billion bite out of GM earnings

Bengaluru – General Motors’ second-quarter earnings took a US$1.1 billion (S$1.4 billion) hit from tariffs, but the automaker still beat analyst expectations for the period on July 22, supported by strong sales of its core petrol trucks and sport utility vehicles (SUV).

The largest US automaker by sales said it expects the tariff impact to worsen in the third quarter and stuck to a previous estimate that trade headwinds threaten to hit the bottom line by US$4 billion to US$5 billion in 2025.

GM said it could take steps to mitigate at least 30 per cent of that impact.

The automaker’s revenue in the quarter ended June 30 fell nearly 2 per cent to about US$47 billion from a year ago. Its adjusted earnings before interest and taxes fell 32 per cent to US$3 billion. 

GM was among corporations that revised annual guidance due to the impact from US President Donald Trump’s tariffs, lowering it to an annual adjusted core profit of between US$10 billion and US$12.5 billion. The company on July 22 stood by that forecast.

Analysts said GM may need to cut investment in future projects or find other ways to trim spending to offset the effect of tariffs. The automaker is so far keeping pricing consistent and absorbing added tariff costs rather than passing them on to customers.

The automaker imports about half of the vehicles it sells in the US, mainly from Mexico and South Korea.

GM announced in June that it would invest US$4 billion in three US facilities in Michigan, Kansas and Tennessee, including a plan to move production of the Cadillac Escalade and increase output of its two big pickup trucks. It added production of its previously Mexico-produced Chevy Blazer to the Tennessee plant.

Crosstown rival Ford produces about 80 per cent of its US-sold vehicles domestically. Ford is expected to report second-quarter results next week.

Jeep-maker Stellantis on July 21 warned that tariffs would significantly affect results in the second half of 2025, saying tariffs had cost it about €300 million in the first half of the year.

Beyond tariffs, GM’s underlying business in the quarter was solid. Sales in the US market – its main source of profit – rose 7 per cent. GM also swung back to a small profit in China, after losing money there a year earlier.

GM took several steps in recent months to bolster its combustion-engine operations through increased investment in its US factory base, calling into question its goal of ending the production of petrol-powered cars and trucks by 2035.

Car companies are increasingly shifting their focus to bolstering the core line-up of petrol trucks and SUVs, as the growth rate of electric vehicle (EV) sales has slowed.

Demand for battery-powered models already has slowed after rapid growth earlier this decade. The trend is intensified by the pending disappearance of government support for the battery-powered models.

Sweeping tax and budget legislation approved by Congress will eliminate US$7,500 tax credits for buying or leasing new EVs and a US$4,000 used-EV credit at the end of September.

Mr Trump also signed tax and budget legislation that eliminates fines for failures to meet fuel economy rules, a move that makes it easier to build more gas-powered vehicles.

“Despite slower EV industry growth, we believe the long-term future is profitable electric vehicle production, and this continues to be our north star,” GM chief executive officer Mary Barra told analysts on July 22. REUTERS