General Motors has revealed that it expects to absorb between $4 billion and $5 billion in additional costs this year as a result of tariffs imposed by the Trump administration on imported vehicles and auto parts.
Although GM has managed to post record profits in recent years, the company now expects its 2025 earnings to fall as the tariff costs mount. The financial blow was detailed in a letter to shareholders released on Thursday morning, which had initially been scheduled for Tuesday. The delay came as GM waited for clarity from the administration on the final details of the new trade policies, following a report of weaker first-quarter earnings.
In response to its lowered earnings forecast, GM has paused plans to buy back more of its own stock, a move it had just announced earlier in the week. This decision could have wider implications beyond shareholders. The 45,000 members of the United Auto Workers union, who receive annual profit-sharing payouts, could also see a reduction. In 2024, union workers received record payouts of up to $14,500.
The automotive sector has been a focal point for the US administration’s trade measures. Tariffs are already in place on most imported vehicles, and additional levies are expected to be applied on many of the foreign parts used in domestic car production.
General Motors remains the largest carmaker in the US, selling 2.7 million vehicles in the country last year. The firm reported net income of nearly $12 billion in 2024, excluding one-off items. According to Barra’s letter, GM supports about 1 million US jobs across employees, suppliers, and dealers, and operates 50 manufacturing and parts facilities across 19 states.
Still, the company’s adjusted earnings forecast has been cut to between $10 billion and $12.5 billion for the year, significantly lower than the $14.9 billion earned in 2024 and below initial estimates from January, issued before the tariffs were announced.
GM is exposed on several fronts. The firm assembled nearly 1 million vehicles in Mexico and Canada last year, many of which were sold in the US. In addition, GM brought in over 400,000 vehicles from South Korea. All imported cars are now subject to a 25% tariff, though certain credits can reduce tariffs on vehicles from Canada and Mexico depending on parts origin.
An estimated 54% of the components in GM’s US-built cars also come from abroad, according to the Kogod School of Business at American University. Many of these imported parts could also face a 25% tariff.
Barra expressed appreciation for partial tariff relief on parts and remained hopeful for further discussions. Although supply disruptions typically push prices higher, consumer demand may not be strong enough to support price hikes. During the chip shortage in 2021, prices soared due to limited supply. However, today’s buyers aren’t benefiting from the low interest rates or government stimulus that helped fuel demand then. Additionally, recent fears of price hikes prompted a surge in purchases earlier this year, potentially dampening future demand.
