U.S. auto giant warns of deeper impact in Q3 despite strong domestic sales
What Happened?
General Motors (GM) reported a 32% drop in its second-quarter core profit, citing a $1.1 billion loss due to tariffs imposed under former President Donald Trump’s trade policies. The automaker’s revenue dipped nearly 2% year-over-year to $47 billion, while adjusted earnings per share fell to $2.53, down from $3.06 last year.
Why Did This Happen?
The decline in profit stems largely from tariff-related costs. GM stated that these tariffs—which affect materials like steel and aluminum—have significantly raised the cost of manufacturing vehicles.
- The company has reaffirmed its projection that tariffs could cost between $4 billion and $5 billion overall.
- GM expects the situation to worsen in the third quarter, even though it plans to offset up to 30% of the impact through internal strategies like supply chain adjustments and cost optimization.
Why Does It Matter?
This earnings report highlights how U.S. protectionist trade policies can affect domestic manufacturers—even the biggest ones. GM is not only grappling with inflation and supply chain bottlenecks but now has to cushion the blow of ongoing tariffs.
The financial hit underscores:
- How international trade tensions still influence bottom lines.
- Why automakers may be forced to pass on costs to consumers, raising car prices.
- The risk that investor confidence could waver—GM shares already dropped 3% in premarket trading after the earnings were published.
What’s Still Working for GM?
Despite the tariff drag, GM had a few strong points:
- U.S. sales rose by 7%, driven by SUVs and pickup trucks—its most profitable product categories.
- The company returned to profitability in China, a critical overseas market where it had faced losses the previous year.
These wins helped GM stick to its full-year profit forecast of $10 billion to $12.5 billion, a figure it had temporarily pulled earlier due to market uncertainty.
Bottom Line
GM’s Q2 performance reveals how deeply trade policies impact corporate profitability. The $1.1 billion tariff cost isn’t just a line item—it’s a strategic challenge. While strong U.S. demand and international recovery provide a cushion, the company now enters Q3 on high alert.
In a nutshell: GM is managing to steer through stormy trade waters, but the worst may not be over yet.