GM CEO Barra Argues Case on Tariffs to President Trump
Earnings Update and Tariff Assumptions
General Motors (GM) Chair and CEO Mary Barra emphasized the company's plans to mitigate potential impacts from tariffs. Despite assuming a "stable" policy environment in its earnings release, GM's full-year 2025 EPS guidance exceeds consensus forecasts, excluding any tariff effects.
Tariffs' Impact on Auto Stocks
Tariffs loom over auto sector stocks due to the industry's significant reliance on imports from Mexico and Canada. UBS estimates account for approximately 26% and 12% of these imports, respectively. GM, in particular, relies on Mexico for the production of pickup trucks and EVs. Similarly, Ford manufactures 12% of its products in these countries.
Potential Reactions to Tariffs
Analysts note the potential for a swift response to tariffs, as the US lacks excess manufacturing capacity. Moreover, the possibility of demand declines exists if automakers increase prices to offset tariff costs. Kelley Blue Book estimates a $3,000 average car price increase under a 25% tariff scenario, which could drive consumers toward used car purchases.
Market Reaction and Tesla's Position
Investors have adopted a cautious approach, with GM and Ford shares experiencing declines since November. Conversely, Tesla's stock has risen as CEO Elon Musk aligns with President Trump's cost-cutting initiatives.