Trump tariffs hit GM hard, earnings drop $1 billion as shares fall

General Motors Faces Tariff Challenges Amid Strong Truck Sales

General Motors (GM) reported a significant financial setback in its second-quarter earnings due to tariffs, with a $1.1-billion impact on its bottom line. Despite this, the company managed to exceed analyst expectations for the period, driven by robust sales of its gasoline-powered trucks and SUVs. However, the automaker warned that the tariff impact is expected to worsen in the third quarter, with trade headwinds potentially costing the company between $4 billion and $5 billion this year.

GM has indicated it could mitigate at least 30% of this impact through various measures. The company's revenue for the quarter ended June 30 fell nearly 2% to about $47 billion compared to the previous year. Its adjusted earnings per share dropped to $2.53 from $3.06, while its adjusted earnings before interest and taxes declined by 32% to $3 billion.

The automaker revised its annual guidance due to the effects of U.S. President Donald Trump’s tariffs, lowering its forecasted annual adjusted core profit to between $10 billion and $12.5 billion. GM remained committed to this forecast despite the challenges.

Analysts noted that one of the reasons GM’s shares fell by 8% was because investors were disappointed the company did not raise its guidance. However, the underlying business performance in the quarter was strong. Sales in the U.S., which remains the company’s main source of profit, increased by 7%. GM continued to maintain strong pricing on its pickup trucks and SUVs, and it returned to a small profit in China after losing money there a year earlier.

Strategies to Offset Tariff Impact

To offset the effects of tariffs, analysts suggested that GM may need to cut investment in future projects or find other ways to trim spending. So far, the automaker has kept pricing consistent and absorbed the added tariff costs rather than passing them on to customers.

Other automakers have also faced similar challenges. Jeep-maker Stellantis warned that tariffs would significantly affect results in the second half of 2025, with the company already experiencing a cost of about 300 million euros in the first half of the year. Shares of Ford Motor fell about 1% on Tuesday, while U.S.-traded shares of Stellantis edged up less than 1%.

Focus on Combustion Engines

In recent months, GM has taken steps to strengthen its combustion-engine operations by increasing investments in its U.S. factory base. This has raised questions about the company’s goal of ending the production of gas-powered cars and trucks by 2035.

GM CEO Mary Barra emphasized that despite slower EV industry growth, the long-term future lies in profitable electric vehicle production. “This continues to be our north star,” she stated.

In June, GM announced a $4 billion investment at three U.S. facilities in Michigan, Kansas, and Tennessee. This includes plans to move production of the Cadillac Escalade and increase output of its two big pickup trucks. Additionally, the automaker added production of its previously Mexico-produced Chevy Blazer to the Tennessee plant. GM imports about half of the vehicles it sells in the U.S., mainly from Mexico and South Korea, while its rival Ford produces about 80% of its U.S.-sold vehicles domestically. Ford is expected to report its second-quarter results next week.

Industry Shifts Toward Gas Trucks and SUVs

Car companies are increasingly shifting their focus to bolstering the core lineup of gas trucks and SUVs as the growth rate of EV sales has slowed. Demand for battery-powered models has already slowed after rapid growth earlier in the decade.

This trend is further intensified by the pending disappearance of government support for battery-powered models. Sweeping tax and budget legislation approved by Congress will eliminate $7,500 tax credits for buying or leasing new electric vehicles and a $4,000 used-EV credit at the end of September. Additionally, Trump signed tax and budget legislation that eliminates fines for failures to meet fuel economy rules, making it easier to build more gas-powered vehicles.