Tariffs, tensions, and the road ahead: GM faces a $5 billion hit under Trump’s trade policies
Shreeaa Rathi | TIMESOFINDIA.COM | May 01, 2025, 22:10 IST
( Image credit : BCCL - Non Copyright )
In light of recent auto tariffs enacted by the Trump administration, General Motors is bracing for a hefty financial setback, with CEO Mary Barra projecting costs could soar to $5 billion. While the company aims to keep prices steady to satisfy consumer demand, this decision could lead to lowered profit expectations, directly affecting stock buyback initiatives and employee bonuses.
In a sobering revelation for the American automotive industry, General Motors CEO Mary Barra announced that the company could face up to $5 billion in additional costs this year due to the Trump administration’s auto tariffs. Despite the massive financial burden, GM does not plan to pass the full weight of these tariffs onto consumers, signaling a cautious balancing act between profit margins and consumer demand.
In an interview with CNN’s Erin Burnett, Barra remained measured yet realistic. “We believe pricing is going to stay at about the same level as it is,” she said, acknowledging that auto prices shift frequently based on market dynamics. Still, she admitted that the company would remain responsive to ongoing changes.
The anticipated tariff costs have already impacted GM’s financial outlook. Earlier this week, the automaker slashed its profit guidance for the year, citing the mounting costs associated with new trade policies. The announcement came in a letter to shareholders, originally slated for release alongside GM’s first-quarter earnings report. However, the announcement was delayed to factor in tariff adjustments from the White House.
GM’s revised financial forecast includes a pause on previously announced stock buybacks—a move that’s likely to rattle investors. The ramifications extend to the United Auto Workers union as well, whose 45,000 members rely on annual profit-sharing bonuses. In 2024, those payments hit a record $14,500. With diminished profits on the horizon, such bonuses could shrink considerably.
The automaker now expects adjusted earnings before interest and taxes to range between $10 billion and $12.5 billion for 2025—a steep drop from last year’s record $14.9 billion. The downturn follows a period of strong performance, including nearly $12 billion in net income for 2024 and U.S. sales totaling 2.7 million vehicles.
Tariffs Targeting North America and Beyond
GM’s challenges stem not just from tariffs on imported vehicles but also on parts critical to domestic manufacturing. The company builds a significant number of vehicles in Mexico and Canada—close to a million in 2024—and imported over 400,000 from South Korea. With all imported vehicles now facing a 25% tariff, the financial hit is widespread, even as the administration offers some relief through credits for North American-made parts.
Of the 1.7 million cars GM built in the U.S. last year, every one relied to some degree on imported parts. According to American University’s Kogod School of Business, those U.S.-built vehicles contain, on average, only 54% American-made components. Starting this Saturday, many of those components could be subject to the new 25% tariff, adding further pressure to GM’s supply chain and bottom line.
Barra expressed cautious optimism, thanking the Trump administration for some concessions on auto parts and encouraging continued dialogue. “We look forward to maintaining our strong dialogue with the administration on trade and other policies as they continue to evolve,” she said.
Will Prices Go Up? Not So Fast
While rising production costs typically lead to higher sticker prices, this situation may play out differently. That’s because automakers don’t directly set retail prices. Cars are sold to independently-owned dealerships, which then negotiate pricing with consumers based on supply, demand, and local market conditions.
If tariffs reduce the number of imported vehicles, that could pressure prices upward. But today’s market is far from the boom days of pandemic-era buying sprees. In 2021, when supply chain issues caused production slowdowns, new car prices surged by 17%, with used car prices skyrocketing by 32%, according to Edmunds. However, that surge was fueled by low interest rates and federal stimulus checks—factors not present in 2025.
Today, consumer confidence is fragile, and recession fears are mounting. While some buyers rushed to purchase cars in March and April, fearing imminent price hikes, that demand may taper off in the months ahead. Softened demand could, paradoxically, help stabilize prices, even as production costs climb.
Economic Uncertainty Rattles the Market
GM is the first major automaker to put a dollar figure on the impact of Trump’s tariffs, but it won’t be the last. Across industries, companies are pulling back on earnings forecasts, and the financial markets are reacting with unease. April closed out with major stock indexes in flux, and fresh GDP data shows an unexpected contraction in the U.S. economy.
While Trump’s administration touts tariffs as a strategy to revive American manufacturing, the short-term consequences have been widespread and painful. For GM, a company that still employs or supports about 1 million Americans through its operations, the challenge is stark: absorb billions in costs, hold the line on consumer prices, and navigate the uncertain terrain of trade politics.
As tariffs loom and economic pressure mounts, all eyes are now on how automakers—and consumers—will respond. One thing is certain: the road ahead for General Motors and the broader auto industry will be anything but smooth.
Would you like a visual chart showing GM’s earnings drop and tariff costs?
In an interview with CNN’s Erin Burnett, Barra remained measured yet realistic. “We believe pricing is going to stay at about the same level as it is,” she said, acknowledging that auto prices shift frequently based on market dynamics. Still, she admitted that the company would remain responsive to ongoing changes.
The anticipated tariff costs have already impacted GM’s financial outlook. Earlier this week, the automaker slashed its profit guidance for the year, citing the mounting costs associated with new trade policies. The announcement came in a letter to shareholders, originally slated for release alongside GM’s first-quarter earnings report. However, the announcement was delayed to factor in tariff adjustments from the White House.
GM’s revised financial forecast includes a pause on previously announced stock buybacks—a move that’s likely to rattle investors. The ramifications extend to the United Auto Workers union as well, whose 45,000 members rely on annual profit-sharing bonuses. In 2024, those payments hit a record $14,500. With diminished profits on the horizon, such bonuses could shrink considerably.
The automaker now expects adjusted earnings before interest and taxes to range between $10 billion and $12.5 billion for 2025—a steep drop from last year’s record $14.9 billion. The downturn follows a period of strong performance, including nearly $12 billion in net income for 2024 and U.S. sales totaling 2.7 million vehicles.
Tariffs Targeting North America and Beyond
GM’s challenges stem not just from tariffs on imported vehicles but also on parts critical to domestic manufacturing. The company builds a significant number of vehicles in Mexico and Canada—close to a million in 2024—and imported over 400,000 from South Korea. With all imported vehicles now facing a 25% tariff, the financial hit is widespread, even as the administration offers some relief through credits for North American-made parts.
Of the 1.7 million cars GM built in the U.S. last year, every one relied to some degree on imported parts. According to American University’s Kogod School of Business, those U.S.-built vehicles contain, on average, only 54% American-made components. Starting this Saturday, many of those components could be subject to the new 25% tariff, adding further pressure to GM’s supply chain and bottom line.
Barra expressed cautious optimism, thanking the Trump administration for some concessions on auto parts and encouraging continued dialogue. “We look forward to maintaining our strong dialogue with the administration on trade and other policies as they continue to evolve,” she said.
Will Prices Go Up? Not So Fast
While rising production costs typically lead to higher sticker prices, this situation may play out differently. That’s because automakers don’t directly set retail prices. Cars are sold to independently-owned dealerships, which then negotiate pricing with consumers based on supply, demand, and local market conditions.
If tariffs reduce the number of imported vehicles, that could pressure prices upward. But today’s market is far from the boom days of pandemic-era buying sprees. In 2021, when supply chain issues caused production slowdowns, new car prices surged by 17%, with used car prices skyrocketing by 32%, according to Edmunds. However, that surge was fueled by low interest rates and federal stimulus checks—factors not present in 2025.
Today, consumer confidence is fragile, and recession fears are mounting. While some buyers rushed to purchase cars in March and April, fearing imminent price hikes, that demand may taper off in the months ahead. Softened demand could, paradoxically, help stabilize prices, even as production costs climb.
Economic Uncertainty Rattles the Market
GM is the first major automaker to put a dollar figure on the impact of Trump’s tariffs, but it won’t be the last. Across industries, companies are pulling back on earnings forecasts, and the financial markets are reacting with unease. April closed out with major stock indexes in flux, and fresh GDP data shows an unexpected contraction in the U.S. economy.
While Trump’s administration touts tariffs as a strategy to revive American manufacturing, the short-term consequences have been widespread and painful. For GM, a company that still employs or supports about 1 million Americans through its operations, the challenge is stark: absorb billions in costs, hold the line on consumer prices, and navigate the uncertain terrain of trade politics.
As tariffs loom and economic pressure mounts, all eyes are now on how automakers—and consumers—will respond. One thing is certain: the road ahead for General Motors and the broader auto industry will be anything but smooth.
Would you like a visual chart showing GM’s earnings drop and tariff costs?