GM Cuts Profit Forecast, Expects Tariffs to Cost $5 Billion

General Motors Co. has revised its full-year profit forecast downward, just two days after temporarily suspending its earnings guidance. The automaker cited the financial burden of new U.S. tariffs on imported vehicles and parts, which could cost the company as much as $5 billion. The revised outlook reflects increasing uncertainty surrounding international trade policy and its impact on the automotive sector.

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According to a letter to shareholders from CEO Mary Barra, GM now anticipates earnings before interest and taxes (EBIT) to fall between $10 billion and $12.5 billion for the year. This is a significant decrease from its initial January forecast, which projected EBIT as high as $15.7 billion. The adjustment comes even after President Donald Trump rolled back certain levies that had previously added cost pressure on automakers.

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Barra made clear that despite recent tariff adjustments, GM still expects its profits to take a hit in 2025 unless the U.S. reaches favorable trade agreements with key international partners. These agreements would help alleviate the financial toll caused by the current tariffs. In her letter, Barra emphasized that GM remains engaged with the Biden Administration and other stakeholders, stating:

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“We look forward to maintaining our strong dialogue with the Administration on trade and other policies as they continue to evolve. As you know, there are ongoing discussions with key trade partners that may also have an impact. We will continue to be nimble and disciplined and keep you updated as we know more.”

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Among the recent changes, President Trump signed two executive orders that offered some relief to automakers. One of the orders removed overlapping tariffs on steel and aluminum used in vehicle production, which helped avoid a compounding effect on costs.

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The other order altered a previously announced 25% tariff on imported auto parts. Under the revised measure, automakers who manufacture and sell vehicles within the U.S. can claim an offset worth up to 3.75% of the value of American-made cars.

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However, this offset will not last indefinitely. It will be reduced to 2.5% after one year and eliminated completely the following year. Moreover, the benefit only applies to vehicles produced after April 3. These changes still leave a 25% duty in place on imported vehicles, a significant challenge for GM.

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The automaker produces several top-selling models outside the U.S., including in Canada, Mexico, and South Korea. Notably, GM manufactures its high-margin pickup trucks in Canada and Mexico and assembles its budget-friendly Chevrolet Equinox and Trax SUVs abroad.

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GM is actively working to reduce its tariff exposure to avoid letting the full $5 billion impact weigh on its bottom line. One such move includes ramping up truck production at its Indiana plant, which allows the company to meet domestic demand without relying heavily on imported models subject to higher duties.

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Despite these challenges, GM reported stronger-than-expected results in the first quarter. On April 29, the company announced it had exceeded Wall Street’s profit estimates, earning $2.78 per share. However, overall profits were down compared to previous quarters, affected by reduced truck production and adverse foreign exchange movements.

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To protect its financial health amid growing trade-related costs, GM has taken several defensive measures. It suspended a planned $4 billion share buyback program and significantly cut back on capital expenditures. During the first quarter, the company reduced spending by $900 million, bringing total capital outlays down to $1.8 billion.

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Even with the better-than-expected quarterly results, investor sentiment remained cautious. GM’s stock has declined more than 4% since the announcement of its first-quarter earnings, reflecting market concerns about the long-term implications of tariff exposure and declining profit forecasts.

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In sum, General Motors is navigating a challenging landscape shaped by evolving trade policies and increased production costs due to tariffs. While the company continues to adapt its manufacturing strategy and financial planning, the uncertainty surrounding international trade remains a significant risk factor. Until more definitive trade agreements are reached, GM may continue to face pressure on its earnings and operational flexibility.

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