GM’s $5B tariff gut punch shows how painful it will be for U.S. automakers to adapt to Trump’s vision

Jessica Mathews

<a href="https://fortune.com/company/general-motors/" target="_blank">General Motors</a> on Thursday became the first U.S. automaker to put a dollar figure on the cost of Trump’s tariffs: $4 billion to $5 billion in 2025.<div class="paywall-selector"></div><div class="paywall">



But the answer to the bigger question—whether these steep penalties will compel GM to move a more meaningful chunk of its vehicle production back to the homeland—remains as vague as ever.&nbsp;



<a href="https://fortune.com/2024/10/02/gm-ceo-mary-barra-cruise-electric-vehicles/">CEO Mary Barra</a> described a variety of “levers” the company can, or already has, pulled to offset some of the bite of the tariffs. Among them, working with suppliers to increase the amount of parts that are compliant with the United States–Mexico–Canada Agreement, building more <a href="https://fortune.com/2025/01/29/gm-electric-vehicles-business-variable-profit-positive-earnings-mary-barra/">battery modules</a> in the U.S., and ramping up production of pickup trucks by roughly 50,000 units on an annualized basis at its Fort Wayne factory. 



“We have excess capacity in the U.S. with the plants that we already have, so that allows us, if we want to make adjustments, we can do it,” Barra said on a conference call with analysts on Thursday. She and GM CFO Paul Jacobson noted that the company has more plans to increase vehicle production in the U.S. going forward, but did not share any details.&nbsp;



“The footprint responses and supply chain responses, et cetera—that&#8217;s what&#8217;s going to take a little bit of time,” Jacobson said on the call. “So as we continue to go through, we&#8217;ll provide more detail on our progress on each of those.”



Asked by an analyst on the call about reshoring auto manufacturing to the U.S., Barra said, “I think we also get fixated on where final assembly is versus all the powertrain plants that we have here, the stamping plants, the fact that we&#8217;ve invested in two battery plants and that&#8217;s what allows us to have such high USMCA compliant parts.”



The comments underscore just how steep of a challenge U.S. automakers face in carrying out President Trump’s vision of bringing manufacturing and supply chains back to the U.S., where costs are higher. The frequent changes to U.S. trade policy in the Trump administration has added to the challenge, <a href="https://fortune.com/article/trump-tariff-trade-war-earnings-ceo-kraft-jetblue-gm-autos/">leaving businesses uncertain</a> if the tariffs announced by Trump will be changed or scrapped weeks later.



GM had <a href="https://fortune.com/2025/04/30/general-motors-withdraws-guidance-massive-tariff-uncertainty-cfo-analyst/">delayed its earnings call</a> and refrained from providing a financial forecast when it reported its quarterly results earlier this week, an unusual move likely due to the ongoing uncertainty around the final form of the 25% tariffs on foreign cars and parts that <a href="https://fortune.com/2025/03/26/trump-sets-auto-tariffs-foreign-made-plants-interest-loans-car/">President Trump first announced in March</a>. On Tuesday, Trump signed a new executive order that said U.S. automakers would get credits and partial offsets for assembling vehicles in the U.S. and using parts that are made in America.



On Thursday’s earnings call, General Motors executives said the company should benefit from those adjustments as it builds about 1.5 million of its fleet in the U.S. each year. Jacobson said on the call that GM’s “primary location for sourcing parts” for assembly in America was the U.S. and that it counted for “well over half” of its annual parts expense. The new adjustments “will help mitigate a substantial portion of tariffs on parts going into those vehicles and help avoid added costs on U.S. vehicle production,” CFO Jacobson said.



But even with these mitigations taken into account, Jacobson said that the tariffs will ultimately lower GM’s projected annual earnings before income tax to between $10–$12.5 billion, down from the $13.7–$15.7 billion it had estimated at the beginning of this year. Jacobson specified that around $2 billion of the tariff expenses will stem from vehicles imported from Korea, as well as Mexico and Canada and higher costs for imported indirect materials. 



Executives at the automaker have been <a href="https://investor.gm.com/news-releases/news-release-details/q1-2025-letter-shareholders">publicly upbeat about Trump</a> and his administration. On the call, Jacobson referred to the auto-focused tariff adjustments from this week as “smart policies that help encourage companies to do more in the U.S. while also ensuring satisfactory return on invested capital.” General Motors CEO Barra said that the company has been in “continual discussions” with Trump and his team and that she felt GM had a “good understanding” of his plans heading into this week.



But in a sign that Trump may not be pleased with GM’s response so far, the automaker’s name was notably absent from <a href="https://www.whitehouse.gov/articles/2025/05/trump-effect-mercedes-to-shift-more-vehicle-production-to-u-s/#:~:text=TRUMP%20EFFECT%3A%20Mercedes%20to%20Shift%20More%20Vehicle%20Production%20to%20U.S.,-The%20White%20House&amp;text=Today%2C%20Mercedes%2DBenz%20announced%20it,pursuit%20of%20American%20manufacturing%20dominance.">a White House press release</a> about U.S. automobile production issued hours after GM’s call on Thursday. The press release touted several automakers making or considering investments in U.S. production including Mercedes-Benz, <a href="https://fortune.com/company/toyota-tsusho/" target="_blank">Toyota</a>, <a href="https://fortune.com/company/honda-motor/" target="_blank">Honda</a>, BMW, and <a href="https://fortune.com/company/nissan-motor/" target="_blank">Nissan</a>, among others.&nbsp;</div>

GM executives described various "levers" the carmarker can pull to offset some of the sting of the tariffs, and said the company should benefit from adjustments to the auto tariffs that Trump announced this week.


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