American car, made in Korea: Why General Motors is hurt by tariffs

Time of India

07-05-2025

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Long gone are the days when an imported car meant a foreign car. And no company proves the point more than General Motors Co.The Detroit stalwart imported more cars into the US last year than any other automaker, even Japan's Toyota Motor Corp. Nearly half of the vehicles GM sold in the US last year - 1.23 million autos - were built abroad, according to researcher GlobalData. That includes many of its most affordable models, like the Korean-made Chevrolet Trax and Buick Envista SUVs, whose low prices depend on cheap production.Now, no American automaker stands to lose more in President Donald Trump's trade war. Trump has slapped 25% tariffs on imported autos, arguing it's a response to unfair barriers that American-made cars face in other countries. But the tariffs have GM scrambling to manage levies of up to $5 billion this year, which despite some offsets will slash 2025 earnings before interest and taxes by about 20%, the company estimates.Other US automakers - the very companies Trump says he's trying to help - will suffer as well, if not quite as much as GM. Except for Tesla and startups like Lucid Group and Rivian Automotive, they all build cars elsewhere to sell in the US. Ford Motor Co. on Monday said it is facing a $2.5 billion tariff hit this year, which it aims to offset with $1 billion in cost savings."It used to be that when you bought a Toyota, it was made in Japan and when you bought a Chevy, it was made here in the US," said Erik Gordon, a professor at the University of Michigan's Ross School of Business. "Now, some Toyotas are made in Japan and some are made in the US. And if you buy a Chevy, it might have been made overseas."GM shares have fallen more than 14% this year as tariffs and an uncertain economy weighed on the stock. Among American automakers, only Ford, which has the lowest tariff exposure, has seen its shares gain this year.GM will use cost cuts to offset 30% of its tariff impact, rather than raise prices on its cars, Chief Financial Officer Paul Jacobson told reporters last week. It also is moving production of some models, including pickup trucks, into its US factories. Analysts say GM could get some relief if a new trade agreement can be reached with South Korea, where the company operates three factories."There are ongoing discussions with key trade partners that may also have an impact," Mary Barra, GM's chief executive officer, said in a May 1 letter to shareholders. "We will continue to be nimble and disciplined."GM said in an email that it can't comment on its import strategy.But the automaker remains committed to its Korean operations, which play a critical role as a global export base for GM's lower-priced models, a company official said, asking not to be identified because the plans were confidential.Jeff Schuster, former vice president of research at GlobalData, projects that car makers selling in the US will cease building 1.5 million mostly lower-priced vehicles because the tariffs will make them uncompetitive. That would worsen an auto affordability crisis in the US, where the average price of a new car tops $48,000, up 21% from five years ago."It does take away the entry market and obviously hurts those buyers that are in that space," Schuster said.