The Trump administration's tariffs on imported cars and auto parts are set to impose a significant financial burden on General Motors (GM), with estimated costs ranging between $4 billion and $5 billion this year. This grim forecast was disclosed by CEO Mary Barra in a letter to shareholders, which was released early Thursday. The letter also included the company's revised earnings guidance for the year, which had been postponed from its original release date on Tuesday. This delay followed GM's announcement of lower first-quarter earnings and the anticipated changes in tariffs from the Trump administration.
As the largest automaker in the United States, GM has become the first major corporation to quantify the financial impact of President Donald Trump's sweeping tariffs. Many other companies have adjusted their earnings forecasts due to the surrounding economic uncertainty, but GM's estimates present a clear picture of the challenges ahead. The tariffs have not only unsettled global companies but have also created ripples of concern among investors, foreign nations, and everyday Americans alike.
The economic climate has been volatile, as major stock indexes concluded a tumultuous April. Recent data revealed that the US gross domestic product unexpectedly contracted in the first quarter, fueling fears of a potential recession. The auto industry has been a primary focus of Trump's tariff initiatives, with existing levies on most imported vehicles and additional tariffs set to take effect on many imported parts this Saturday.
While GM may not hold the dominant position in the global auto market that it once did, it remains the largest American automaker, having sold 2.7 million cars and trucks in the US last year. Despite the challenges posed by tariffs, GM has maintained profitability, reporting a record net income nearing $12 billion in 2024, excluding special items. In her letter, Barra emphasized the importance of GM to the US economy, noting that approximately 1 million US workers depend on the company, either directly as employees or indirectly through suppliers and dealerships. GM operates 50 manufacturing plants and parts facilities across 19 states.
Due to the ongoing tariff situation, GM now projects adjusted earnings before interest and taxes to fall between $10 billion and $12.5 billion this year. This is a marked decrease from the $14.9 billion earned last year and lower than the guidance provided in January, prior to the announcement of the tariffs. GM is facing tariffs from multiple angles, as it manufactures cars and trucks in Mexico and Canada, producing nearly 1 million vehicles in those countries last year, most of which are exported to US dealerships.
In addition to its production in North America, GM imported over 400,000 vehicles from South Korea last year. Currently, all imported cars are subject to a 25% tariff, although there are provisions that may reduce the tariffs for vehicles assembled with American and Canadian-made parts. Furthermore, all 1.7 million cars and trucks that GM built in the US last year incorporated imported parts to some extent. According to estimates from the American University Kogod School of Business, GM's US-manufactured vehicles have an average of 54% American-made content.
Effective this Saturday, GM is poised to face 25% tariffs on many imported components, amplifying its cost challenges. While the Trump administration has announced some partial offsets, GM is still bracing for substantial expenses. Nevertheless, CEO Mary Barra expressed gratitude towards the administration for the relief on auto parts tariffs and maintained optimism for further adjustments. She stated, “We look forward to maintaining our strong dialogue with the administration on trade and other policies as they continue to evolve.” Barra also noted that ongoing discussions with key trade partners might further influence the situation.
