Written By Lexx Thornton
The largest American automaker is feeling the sting of tariffs.
On Tuesday, General Motors reported a more than $1 billion drop in its second quarter profits compared to a year ago. The company attributes the fall in part to tariffs and says the worst impacts may still be ahead. President Donald Trump’s 25% tariffs on foreign-made vehicles and certain car parts remain in effect, and broader country-specific tariffs are scheduled to take effect on August 1st.
So far, automakers have eaten the costs of tariffs. But that won’t last forever, says Sam Fiorani,the vice president at research firm Auto Forecast Solutions. “They have to pass them onto theconsumer in the longer term. It just doesn’t work financially for them to absorb a 10, 20, 30%tariff on all the parts and all the vehicles,” Fiorani said.
Shrinking profits for automakers could also force them to cut back on production.
“You’re going to see a lot of entry-level models going away if the tariffs continue,” Fiorani said.”We’re going to see a lot reduction in choice. We’re going to see a lot of reduction intechnologies. And we’re going to see a higher price on every vehicle.”
The Trump administration claims tariffs will bring supply chains back to the U.S. and increase domestic production. GM says the company is investing $4 billion in U.S. plants to build more cars in the U.S. It says that will reduce the impact of tariffs. But vehicles from those new plantswon’t be ready for another year and a half.
