GM's recent financial blow: $1.1 billion in tariff costs
The auto industry has been grappling with the effects of a 25% tariff on imported cars and auto parts, a policy announced three months ago. This tariff has taken a significant toll on major players like General Motors (GM) and Stellantis, leading to profit pressures, production cuts, and increased vehicle prices.
The tariffs have directly impacted GM and Stellantis in several ways. Both companies have reported profit losses due to the increased costs of imported auto parts and vehicles, which has squeezed their margins. To combat rising costs, automakers are reducing production, potentially leading to fewer models being available, particularly affecting entry-level vehicles. This contraction in product lines reduces consumer choice and may slow sales.
The tariffs may also result in higher vehicle prices and a limited introduction of new technologies, as manufacturers look to offset tariff expenses. Additionally, employment risks loom over the automotive sector, with the tariffs expected to reduce car sales and potentially jeopardise jobs, particularly in manufacturing hubs like Michigan.
GM, which built approximately 1 million vehicles in Canada and Mexico in 2024, accounting for about 36% of its total North American production, has incurred a significant cost due to tariffs. The company reported a $1.1 billion cost due to tariffs on imported cars and auto parts in the second quarter alone. GM has no immediate plans to increase car prices specifically to cover tariff costs, but industrywide car prices are forecasted to rise between 0.5% and 1% for the year.
Stellantis, a GM rival, has also felt the brunt of the tariffs, with the company estimating that tariffs cost it approximately $350 million in the first half of the year. The company sells cars in the United States under various brands, including Jeep, Ram, Dodge, Chrysler, Fiat, and Alfa Romeo.
While the initial 25% tariff was widely applied, specific trade deals have altered these rates for certain countries. For example, the U.S. and Japan reached a deal in July 2025 where tariffs on Japanese auto imports were reduced from a threatened 25% to 15%, which likely eased some pressure on exports and imports between the two countries. However, the overall tariff burden on the industry remains.
Despite these challenges, GM is still on track to bring in an adjusted operating income of between $10 billion to $12.5 billion for the full year. The supply of pre-tariff vehicles differs by model and manufacturer, offering some relief to consumers in the short term. However, industry experts predict that these costs will eventually be passed onto consumers through higher vehicle prices and reduced product choices.
The tariffs, first proposed by President Donald Trump, have greatly disrupted the auto industry, more so than most other businesses. As the industry navigates these challenges, it remains to be seen how the tariffs will continue to impact profitability, production, and consumer choices in the long term.
References: [1] "U.S. Auto Tariffs: How They're Impacting General Motors and Stellantis," The Wall Street Journal, 15 August 2025. [2] "U.S.-Japan Auto Tariff Deal Signed: What It Means for the Industry," Forbes, 1 July 2025. [3] "Economic Impact of U.S. Auto Tariffs: A Preliminary Analysis," The Brookings Institution, 1 June 2025.
- The manufacturing sector, particularly the automotive industry, has faced significant profit pressures and production cuts due to a 25% tariff on imported cars and auto parts.
- General Motors (GM) and Stellantis, major players in the industry, have reported substantial losses as a result of increased costs from imported parts and vehicles.
- In an effort to combat rising costs, automakers like GM and Stellantis are reducing production, which may limit consumer choice and slow sales, particularly in entry-level vehicles.
- Tariffs have also led to increased vehicle prices and a potential slowdown in the adoption of new technologies to offset these expenses.
- Jobs in the automotive sector, especially in manufacturing hubs like Michigan, are at risk due to the expected reduction in car sales as a result of tariffs. Additionally, the banking-and-insurance, energy, aerospace, retail, and transportation sectors could also experience indirect impacts.
