American Car, Made in Korea: Why GM Is Getting Roiled by Tariffs
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.
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The Hill
3 hours ago
- The Hill
GM's quarterly results illustrate the folly of tariffs
General Motors, a cornerstone of American industry, is suffering the consequences of President Trump's unconstitutional 25 percent tariffs on imported vehicles and auto parts. In the second quarter of 2025, GM suffered a $1.1 billion tariff blow to its operating income, slashing the company's profit margin from a healthy 9 percent to just 6.1 percent. Net income plunged by 36.1 percent from the prior quarter and by a staggering 40.7 percent compared to a year ago. Although the estimated tariff impact for the full year of $4 billion to $5 billion is less than 3 percent of GM's overall revenue, that cost represents more than half of the typical annual income for the company over the past decade. The consequences extend far beyond GM's balance sheet. Tariffs, paid by importers to the federal government, are partly absorbed by companies and partly passed to consumers. We've especially seen this in import-sensitive sectors including furnishings, appliances, clothes and toys. Men's shirts and sweaters, for instance, rose 4.9 percent in June alone. When businesses 'eat' the cost, as GM tried to do last quarter, the fallout is no less severe. Diminished earnings mean less capital for investment in better technology or expanded operations, slowing broader economic growth, fewer resources for pay raises or new jobs — hardly the boon for workers that tariff advocates promise. The data confirms this. Nationwide, 14,000 manufacturing jobs disappeared in the past two months, erasing all gains in 2025. In June, real average weekly earnings dropped by 0.4 percent, an annualized loss of nearly 5 percent. Shareholders are also feeling the pinch. Stock valuations track a company's expected future earnings. Since 2012, GM's stock price increased by more than 200 percent. GM's price-to-earnings ratio today stands at 6.83, almost identical to 2012 levels. Stock prices increased alongside earnings. A sustained $5 billion annual hit, wiping out over half of GM's annual net income, could erase more than $20 billion in market capitalization if valuations adjust. With tariffs eroding profits, is it any wonder that GM's stock has slid 8 percent since its post-2024 election peak and now languishes 13 percent off its 2021 highs? This affects millions of middle-class Americans and retirees with pensions and savings invested. More broadly, lower dividends and diminished returns discourage investment, starving companies of the capital needed to expand. The result: slower growth, fewer jobs and weaker wage gains. GM, to its credit, is fighting to offset 30 percent of this burden by boosting U.S. production, cutting costs and increasing domestic content to comply with the USMCA trade agreement's labyrinthine rules. Yet even if successful, the net impact of $2.8 billion to $3.5 billion will devour a significant slice of GM's already thin margins. Profit margins at GM — as in most other sectors — are far less than conventional wisdom. GM's net profit margin over the past decade has averaged less than 5 percent. In other words, a $30,000 vehicle yields less than $1,500 in profit. GM's plans to shift some production to U.S. plants and rework supply chains is a testament to private enterprise's resilience. But make no mistake: These shifts sacrifice efficiency for compliance. Restructuring operations in a free market in pursuit of efficiency yields more profit, consumer benefit and economic growth. Doing so under duress to escape arbitrary tariffs may result in survival, but without these benefits. Resources that could have fueled innovation or lowered prices are now squandered on navigating artificial trade barriers. As an important sidenote, roughly half the tariff's cost stems from GM's South Korean operations, a stark reminder of the folly of taxing trade with allies. Rather than strengthening ties with democratic partners through bold free-trade agreements, these tariffs risk pushing nations like South Korea toward China, America's chief adversary. Far from economic strategy, it is geopolitical shortsightedness. Politicians sometimes prefer tariffs to other forms of taxation because they are less visible than taxes on income or sales. This makes it easier to dodge accountability by blaming 'greedy' corporations. For this reason, Trump called Jeff Bezos to deter Amazon from listing tariff costs on purchases. The White House press secretary labeled this a 'hostile and political act by Amazon.' Regardless, protectionism is not cost-free. Sustained tariffs will raise prices, shrink profits, erode real wages and slow economic growth. GM's quarterly results are a warning.
San Francisco Chronicle
8 hours ago
- San Francisco Chronicle
US seeks shipbuilding expertise from South Korea and Japan to counter China
WASHINGTON (AP) — American lawmakers are using a trip to South Korea and Japan to explore how the United States can tap those allies' shipbuilding expertise and capacity to help boost its own capabilities, which are dwarfed by those of China. Sens. Tammy Duckworth, D-Ill., and Andy Kim, D-N.J., who are scheduled to land in Seoul on Sunday before traveling to Japan, plan to meet top shipbuilders from the world's second- and third-largest shipbuilding countries. The senators want to examine the possibilities of forming joint ventures to construct and repair noncombatant vessels for the U.S. Navy in the Indo-Pacific and bring investments to American shipyards. 'We already have fewer capacity now than we did during Operation Iraqi Freedom" in 2003, Duckworth told The Associated Press. 'We have to rebuild the capacity. At the same time, what capacity we have is aging and breaking down and taking longer and more expensive to fix.' Their trip comes as President Donald Trump demands a plan to revive U.S. shipyards and engage foreign partners. The Pentagon is seeking $47 billion for shipbuilding in its annual budget. The urgency stems from the fact that Washington severely lags behind China in building naval ships, a situation raising alarms among policymakers who worry the maritime balance of power could shift to China, now the world's No. 1 shipbuilder. Duckworth, who serves on the Senate Armed Services Committee, said she hopes the trip could lead to joint ventures among the U.S. military, American companies and foreign partners to build auxiliary vessels for the Navy and small boats for the Army. Another possibility is repairing U.S. ships in the Indo-Pacific region. 'If we have to bring ships all the way back to the United States ... to wait two years to be fixed, that doesn't help the situation,' Duckworth said. The discussions, she said, will focus on auxiliary vessels, which are noncombatant ships such as fueling and cargo vessels that support naval and military operations. The Navy's auxiliary fleet is aging and insufficient in numbers, she said. The U.S. commercial shipbuilding accounted for 0.1% of global capacity in 2024, while China produced 53%, followed by South Korea and Japan, according to a report by the Center for Strategic and International Studies. A Navy review from April 2024 found that many of its major shipbuilding programs were one year to three years behind schedule. During the trip, the senators are expected to meet representatives from major shipbuilders in the region. South Korea and the U.S. are already making progress on shipbuilding cooperation. In March, Hanwha Ocean completed maintenance work for a 41,000-ton U.S. Navy dry cargo and ammunition ship in South Korea. The overhaul of USNS Wally Schirra was the Korean company's first project after it secured a repair agreement with the U.S. Navy in July 2024. Hanwha Group last year acquired Philly Shipyard in Philadelphia, which builds large merchant mariners, part of the reserve auxiliary fleet. Earlier this month, South Korea proposed to invest $150 billion in the U.S. shipbuilding industry to support Trump's 'Make American Shipbuilding Great Again' initiative as part of its tariffs talk with the White House. This month, China formed the world's biggest shipbuilding company by merging two state-owned shipbuilders. The combined entity China State Shipbuilding Corporation produces Chinese navy's combat vessels from aircraft carriers to nuclear submarines. It commands 21.5% of global shipbuilding market.
The Hill
8 hours ago
- The Hill
US seeks shipbuilding expertise from South Korea and Japan to counter China
WASHINGTON (AP) — American lawmakers are using a trip to South Korea and Japan to explore how the United States can tap those allies' shipbuilding expertise and capacity to help boost its own capabilities, which are dwarfed by those of China. Sens. Tammy Duckworth, D-Ill., and Andy Kim, D-N.J., who are scheduled to land in Seoul on Sunday before traveling to Japan, plan to meet top shipbuilders from the world's second- and third-largest shipbuilding countries. The senators want to examine the possibilities of forming joint ventures to construct and repair noncombatant vessels for the U.S. Navy in the Indo-Pacific and bring investments to American shipyards. 'We already have fewer capacity now than we did during Operation Iraqi Freedom' in 2003, Duckworth told The Associated Press. 'We have to rebuild the capacity. At the same time, what capacity we have is aging and breaking down and taking longer and more expensive to fix.' Their trip comes as President Donald Trump demands a plan to revive U.S. shipyards and engage foreign partners. The Pentagon is seeking $47 billion for shipbuilding in its annual budget. The urgency stems from the fact that Washington severely lags behind China in building naval ships, a situation raising alarms among policymakers who worry the maritime balance of power could shift to China, now the world's No. 1 shipbuilder. Duckworth, who serves on the Senate Armed Services Committee, said she hopes the trip could lead to joint ventures among the U.S. military, American companies and foreign partners to build auxiliary vessels for the Navy and small boats for the Army. Another possibility is repairing U.S. ships in the Indo-Pacific region. 'If we have to bring ships all the way back to the United States … to wait two years to be fixed, that doesn't help the situation,' Duckworth said. The discussions, she said, will focus on auxiliary vessels, which are noncombatant ships such as fueling and cargo vessels that support naval and military operations. The Navy's auxiliary fleet is aging and insufficient in numbers, she said. The U.S. commercial shipbuilding accounted for 0.1% of global capacity in 2024, while China produced 53%, followed by South Korea and Japan, according to a report by the Center for Strategic and International Studies. A Navy review from April 2024 found that many of its major shipbuilding programs were one year to three years behind schedule. During the trip, the senators are expected to meet representatives from major shipbuilders in the region. South Korea and the U.S. are already making progress on shipbuilding cooperation. In March, Hanwha Ocean completed maintenance work for a 41,000-ton U.S. Navy dry cargo and ammunition ship in South Korea. The overhaul of USNS Wally Schirra was the Korean company's first project after it secured a repair agreement with the U.S. Navy in July 2024. Hanwha Group last year acquired Philly Shipyard in Philadelphia, which builds large merchant mariners, part of the reserve auxiliary fleet. Earlier this month, South Korea proposed to invest $150 billion in the U.S. shipbuilding industry to support Trump's 'Make American Shipbuilding Great Again' initiative as part of its tariffs talk with the White House. Duckworth said she had earlier conversations with Hyundai Heavy Industries 'about them actually buying into U.S. shipyards on U.S. soil'. This month, China formed the world's biggest shipbuilding company by merging two state-owned shipbuilders. The combined entity China State Shipbuilding Corporation produces Chinese navy's combat vessels from aircraft carriers to nuclear submarines. It commands 21.5% of global shipbuilding market.
