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Chicago Tribune
a day ago
- Business
- Chicago Tribune
Americans largely are paying for Trump's tariffs, not foreign companies
Who's paying for Donald Trump's tariffs? So far, American businesses and consumers. General Motors Co. was the latest U.S. company to disclose how the levies are raising costs, with the automaker saying Tuesday that the duties dented profits by more than $1 billion as it chose to absorb the blow. That helps explain why car prices didn't rise in last week's inflation data, while robust price increases for other commonly imported goods like toys and appliances showed those tariff expenses are being passed on to consumers. Meanwhile, import prices excluding fuel were up notably in June, suggesting foreign companies aren't shouldering the burden by offering U.S. firms lower prices — challenging the president's claims that other countries pay the rate. Trump reiterated that characterization on Tuesday after a meeting with his counterpart in the Philippines, saying that country 'will pay a 19% Tariff' in a post on social media. While customs duties are giving a significant boost to U.S. revenues, the data show that those coffers are being filled domestically. 'The top-down macro evidence seems clear: Americans are mostly paying for the tariffs,' George Saravelos, global head of FX research at Deutsche Bank AG, said in a note Tuesday. 'There is likely more pressure on U.S. consumer prices in the pipeline.' Many economists agree, especially as relatively tame readings in the consumer price index this year underscore firms' hesitation to pass on tariffs to customers. That's also been evident in the producer price index, where the rate of increase in a measure of margins for wholesalers and retailers has slowed sharply in recent months. 'With little relief on import prices, domestic firms are stomaching the cost of higher tariffs and starting to pass it on to consumers,' Wells Fargo & Co. economists Sarah House and Nicole Cervi said in a note last week. 'The recent rise in import prices points to foreign suppliers generally resisting price cuts.' Granted, there are some signs that foreign suppliers are absorbing part of the impact to keep goods flowing to the U.S. Export prices in Japan have contracted for three straight months, and the country's carmakers cut prices to the U.S. in June by a record in data going back to 2016. But for many foreign companies, the slide in the U.S. dollar has incentivized them to raise their invoice prices to compensate, according to Wells Fargo. And Deutsche Bank's Saravelos said the pressure on U.S. firms so far to bear tariff costs is another headwind for the greenback, which is already on its worst start to a year since the 1970s. Forecasters doubt U.S. corporations will sacrifice profits for much longer. 3M Co. raised its earnings outlook last week as shifting production and pricing changes will help mitigate the impact of tariffs. Nike Inc. is planning 'surgical' price hikes to help soften the blow, as the company expects the levies to increase costs by about $1 billion. 'If consumers and foreign firms are not bearing tariff costs, domestic firms are. That is something that eventually should be reflected in corporate earnings announcements,' Citigroup Inc. Chief U.S. Economist Andrew Hollenhorst said in a note Tuesday. 'We will be listening this quarter, but firms may still emphasize uncertainty and (perhaps rightly) expect that the burden sharing can shift in coming months.'
Yahoo
a day ago
- Automotive
- Yahoo
Automakers say tariffs are costing them billions and warn of steeper losses ahead
Two automakers with manufacturing operations in Canada, General Motors Co. and Stellantis NV, reported this week that tariffs are taking billions of dollars out of their profits. On Tuesday, GM said tariffs had a net impact of about $1.5 billion on its second-quarter earnings before interest and taxes (EBIT). One day earlier, Stellantis, which produces Fiat and Chrysler vehicles, reported that tariffs exacted a hit of about $477 million through the first half of the year, but warned of steeper losses ahead. Since the tariffs took effect earlier this year, automakers in North America have been warning that tariffs will add costs and make them less competitive at a time when they are navigating a complex transition to electric vehicles. One end result may be less vehicle production in Canada. 'These earnings reports from automakers underline the reasons why we urgently need to get to a deal (with the U.S.) that removes tariffs,' said Brian Kingston, president of the Canadian Vehicle Manufacturers' Association (CVMA), a trade industry lobby group that represents both GM and Stellantis. Beginning in March, when the U.S. briefly imposed blanket 25 per cent tariffs on Canadian goods, and then resuming in April, when the U.S. imposed a 25 per cent tariff specifically on all vehicle imports, auto exports to the U.S. have faced a 25 per cent tariff. The U.S. ultimately adjusted its policy such that vehicles compliant with the Canada-United States-Mexico Agreement (CUSMA) could mitigate the tariff rate based on the percentage of U.S.-built parts contained in a vehicle. At the same time, in April, Canada applied its own 25 per cent counter-tariffs to U.S.-built vehicles. Taken together, the policies are forcing North America's automakers to overhaul their operations so that more vehicles are built in the market where they are sold. That is proving to be an expensive proposition for an industry that spent the past two decades operating under free trade agreements that incentivized global supply chains, under which vehicles cross borders multiple times before being delivered to their end markets. Prime Minister Mark Carney has said he is aiming for a comprehensive trade deal by early August, but also has said there is likely to be some baseline level of tariffs on exports to the U.S. Overall, the uncertainty is already having an impact on Canada's auto sector. GM, for example, has said it plans this fall to cut the third shift at its Oshawa, Ont., plant — expected to cause about 700 layoffs — where it makes light duty and heavy duty Chevy Silverado pickup trucks. At the same time, it has added a shift in Indiana where it also makes the trucks. In addition to the impacts of layoffs on Canadian workers, the move could have another effect: Canada created a 'duty remission' scheme that allowed automakers to import vehicles from the U.S. duty free, based on the number of vehicles produced here. The shift change could reduce GM's production in Canada by one-third. Jennifer Wright, a GM spokesperson, said the federal government is well aware of the impending shift reduction, but could not say how it would affect its duty remission allowance, not least because Carney is hoping to reach a trade agreement before that. The situation shows how automakers are seeking to reconfigure cross-border operations to mitigate their tariff exposure. Wright noted that in 2024, GM sold 294,000 vehicles in Canada, which were produced in South Korea, Mexico, the U.S., and Canada. Now, tariffs create incentives to disentangle global supply chains. 'The auto sector has been designed in the last few years to be a very integrated market,' said Wright. GM said on its earnings call on Thursday that it expects tariffs to take US$4 billion to US$5 billion out of its earnings for 2025. So far, the company has posted strong sales in Canada in 2025, showing an eight per cent year-over-year increase in the second quarter. But Wright also said sales surged before tariffs took effect and she expects to see a softening as the year progresses. Meanwhile, Stellantis earlier this year indefinitely paused a multibillion dollar overhaul of its assembly plant in Brampton, Ont., which was being retooled so it could produce battery-electric, hybrid or internal combustion engine Jeeps, depending on market demand. At its Windsor, Ont., plant, the company continues to produce hybrid and internal combustion engine Chrysler Pacifica minivans, and battery-electric Dodge Chargers, but it has temporarily paused operations twice this year since tariffs were announced. Earlier this year, the company estimated that tariffs could cost it more than $2 billion. But the company is also battling sluggish sales, and shipments within North America fell 25 per cent in the first quarter of the year. GM to cut shifts at Oshawa Assembly Plant in move union calls 'reckless' How Trump's tariffs are already hobbling Canada's auto sector Kingston, of the CVMA, said that overall he expects vehicle sales in all of North America to drop by roughly 10 per cent in 2025. Although Carney has set an Aug. 1 deadline for a trade deal, Kingston called it an 'optimistic scenario.' Nonetheless, he said it is vital to the health of his industry to resolve the trade war quickly. 'The U.S. trade policy is doing significant damage to American automakers,' Kingston said. 'We need a resolution and we need it quickly.' • Email: gfriedman@ Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Miami Herald
2 days ago
- Business
- Miami Herald
Americans are paying for Trump's tariffs, not foreign companies
Who's paying for Donald Trump's tariffs? So far, American businesses and consumers. General Motors Co. was the latest U.S. company to disclose how the levies are raising costs, with the automaker saying Tuesday that the duties dented profits by more than $1 billion as it chose to absorb the blow. That helps explain why car prices didn't rise in last week's inflation data, while robust price increases for other commonly imported goods like toys and appliances showed those tariff expenses are being passed on to consumers. Meanwhile, import prices excluding fuel were up notably in June, suggesting foreign companies aren't shouldering the burden by offering U.S. firms lower prices - challenging the president's claims that other countries pay the rate. Trump reiterated that characterization on Tuesday after a meeting with his counterpart in the Philippines, saying that country "will pay a 19% Tariff" in a post on social media. While customs duties are giving a significant boost to U.S. revenues, the data show that those coffers are being filled domestically. "The top-down macro evidence seems clear: Americans are mostly paying for the tariffs," George Saravelos, global head of FX research at Deutsche Bank AG, said in a note Tuesday. "There is likely more pressure on U.S. consumer prices in the pipeline." Many economists agree, especially as relatively tame readings in the consumer price index this year underscore firms' hesitation to pass on tariffs to customers. That's also been evident in the producer price index, where the rate of increase in a measure of margins for wholesalers and retailers has slowed sharply in recent months. "With little relief on import prices, domestic firms are stomaching the cost of higher tariffs and starting to pass it on to consumers," Wells Fargo & Co. economists Sarah House and Nicole Cervi said in a note last week. "The recent rise in import prices points to foreign suppliers generally resisting price cuts." Granted, there are some signs that foreign suppliers are absorbing part of the impact to keep goods flowing to the U.S. Export prices in Japan have contracted for three straight months, and the country's carmakers cut prices to the U.S. in June by a record in data going back to 2016. But for many foreign companies, the slide in the U.S. dollar has incentivized them to raise their invoice prices to compensate, according to Wells Fargo. And Deutsche Bank's Saravelos said the pressure on U.S. firms so far to bear tariff costs is another headwind for the greenback, which is already on its worst start to a year since the 1970s. Forecasters doubt U.S. corporations will sacrifice profits for much longer. 3M Co. raised its earnings outlook last week as shifting production and pricing changes will help mitigate the impact of tariffs. Nike Inc. is planning "surgical" price hikes to help soften the blow, as the company expects the levies to increase costs by about $1 billion. "If consumers and foreign firms are not bearing tariff costs, domestic firms are. That is something that eventually should be reflected in corporate earnings announcements," Citigroup Inc. Chief U.S. Economist Andrew Hollenhorst said in a note Tuesday. "We will be listening this quarter, but firms may still emphasize uncertainty and (perhaps rightly) expect that the burden sharing can shift in coming months." (With assistance from Catherine Larkin and Carter Johnson.) Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
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Business Standard
2 days ago
- Automotive
- Business Standard
General Motors profit falls as Trump tariffs add $1.1 billion in costs
General Motors Co. said it suffered a $1.1 billion profit hit from Donald Trump's tariffs and revealed no plan for a near-term fix to return to pre-tariff profit levels. The Detroit-based automaker said Tuesday it earned $2.53 per share on an adjusted basis, above the Bloomberg consensus forecast of $2.33 but short of the $3.06 it made a year ago. GM's profits also suffered from higher warranty costs and a buildup in inventory of electric vehicles, which are set to lose federal subsidies under Trump's recently passed budget bill. GM's results showcase the difficulty automakers face to maintain profits in an environment that newly penalizes globally integrated parts supply chains and cross-border vehicle sales. Even though the automaker beat profit expectations, earnings in its all-important US business suffered from import duties on vehicles made in Canada, Mexico and South Korea. GM hasn't moved to raise already high average sticker prices enough to recoup tariff costs, instead opting to absorb the blow by cutting costs and repatriating some production. Chief Executive Mary Barra hinted at the challenges adjusting to the new reality in a letter to shareholders. 'We are positioning the business for a profitable, long-term future as we adapt to new trade and tax policies, and a rapidly evolving tech landscape,' Barra said, noting an announcement in June to shift some production to the US from Mexico. Shares of the carmaker fell 5.9 per cent to $50.07 as of 9:40 am in New York. GM grew US vehicles sales in the the quarter despite higher tariffs and achieved a second straight quarterly profit in China, which improved by $175 million over a year ago. But net income still declined 35 per cent to $1.9 billion compared with $2.9 billion in the second quarter of last year. The carmaker said it can offset one-third of its $4 billion to $5 billion in tariff exposure later this year as more of its mitigation efforts begin to more fully take hold. But it also indicated that the toll from those trade levies may be higher in the current quarter than in the April-June period. In last month's announcement, GM said it will invest $4 billion to add more production to factories in Michigan, Kansas and Tennessee. Part of that move includes building more small SUVs and large pickups in the US instead of Mexico. The company kept its current full-year forecast for earnings before interest and taxes in a range of $10 billion to $12.5 billion. GM had slashed its 2025 outlook in May, cutting it from initial projection in January for earning as much as $15.7 billion this year. Evercore analyst Chris McNally said in a research note to investors that unchanged forecast 'may be the slight disappointment' to some investors who had hoped for an improvement. Some non-tariff costs also hurt GM in the most recent quarter. The company said in April that it would recall nearly 600,000 trucks due to an engine defect, which contributed to $300 million in costs in the latest three-month period. It also built up EV inventory as it launched new models and worked to spur plug-in sales, but that added $600 million in costs as those cars lose money. Weaker pricing on fleet sales weighed on profits to the tune of $200 million. All told, earnings before interest and taxes in GM's North America business fell $2 billion in the quarter compared with the same period a year ago. Revenue fell 1.8 per cent to $47.1 billion, partly from weaker pricing.
Los Angeles Times
6 days ago
- Automotive
- Los Angeles Times
Carmakers face uncertainty as tariffs and earnings collide
Investors in auto firms, which sit squarely in the bullseye of President Donald Trump's trade war, are about to find out if earnings back up the sector's scorching rebound from this year's lows. A gauge of stocks of U.S. carmakers and suppliers has soared more than 40% from its tariff-fueled April depths, handily beating the S&P 500 Index's 26% gain. Meanwhile, the MSCI World Auto and Components Index has climbed 30% in that period, outpacing the MSCI World Index's 25% advance. Investors dove into the beaten-down shares during the furious rally unleashed when Trump paused most of his aggressive levies in April. But the recovery, which has since stalled out, creates a conundrum: While the shares are now much more costly, the tariff outlook hasn't grown much clearer as the sector gets ready to announce quarterly profits starting next week. Add to that headwinds around the affordability of new vehicles, rising global competition from Chinese brands like BYD Co., and China's efforts to regulate the sector, and some analysts are wary of making broad bets on the industry at the moment. 'Auto stocks have bounced back, but the setup into earnings is murky,' said Keith Lerner, co-chief investment officer at Truist Advisory Services. 'This is a market for selectivity, not broad exposure.' General Motors Co., Tesla Inc. and Volkswagen AG release earnings next week, with Ford Motor Co., Stellantis NV, Mercedes-Benz Group AG and BMW AG coming the week after. Japan's Toyota Motor Corp., the world's No. 1 carmaker, and China's Geely Automobile Holdings Ltd. are due to report next month. Most companies are poised to announce numbers for the three months through June — after a stretch in which Trump unveiled a slew of tariffs on auto imports, goods from Mexico and Canada, steel and aluminum and nearly all U.S. trading partners. Many of the measures have been paused, but this month brought a fresh blow as Trump announced tariffs on copper and unleashed ultimatums on counterparts including Japan, Brazil, the European Union and Mexico. The impact of the potential tariff regime on automakers, which have a sprawling global supply chain and are uniquely exposed to the risk, is a key theme investors and analysts will be watching. 'It is a fluid situation still and investors were not really prepared for the latest round of tariffs that were announced earlier this month,' said Garrett Nelson, an analyst at CFRA Research. He has a hold-equivalent rating on the U.S. auto sector, citing valuations and tariff-related uncertainty among other reasons. Wall Street is already lowering expectations for some of the biggest carmakers. Analysts' second-quarter average profit estimate for GM has dropped 18% over the past six months and Ford's has sunk 30%, according to Bloomberg Intelligence. For EV giant Tesla it's declined 47% over the same period, with a potential hurdle looming as a federal tax credit for consumer purchases of electric vehicles ends in September. The overarching question is how companies are handling tariff-triggered cost increases. A Bank of Japan report this month showed the country's automakers slashed prices of exports to the U.S. — a sign they were sacrificing profits to stay competitive. Industry analysts expect Toyota to fare better than its domestic peers given its sizable profits, and see Honda Motor Co. benefiting from extensive local manufacturing. Volkswagen's sales dropped 16% in the U.S. in the second quarter, a sharp reversal from the 4.4% growth in the first three months of the year before the new levies took effect. This week, Sweden's Volvo Car AB said it was taking an impairment charge of about $1.2 billion due to delays to some electric models and climbing tariff costs. Its CEO on Thursday urged the EU to cut tariffs on the U.S. to help a trade deal. In contrast to the U.S. sector's performance, the Stoxx 600 Automobiles and Parts gauge of European producers has trailed the rebound in the region's broader Stoxx 600 from an April low. 'The European mass-market players will be fighting for their piece of a pie in a pie that is pretty much stable, or unchanging, over the medium- to longer-term, with more competitors,' said Rella Suskin, an analyst at Morningstar Inc. 'So someone's got to lose share somewhere.' A fast-emerging theme for European carmakers that have reported sales for the second quarter has been weakness in China — one of the world's largest auto markets — where domestic companies have become tough competitors. German sportscar maker Porsche AG said its global deliveries fell 6% in the first half of the year, and warned of a difficult road ahead due to fierce competition in China and slowing momentum in the U.S. BMW AG's sales stagnated in the second quarter as deliveries in China dropped, and Mercedes-Benz Group AG's vehicle sales declined in both the U.S. and China. 'China is probably a lost cause for all foreign brands, except for Tesla,' Piper Sandler analyst Alex Potter wrote in a note to clients this month. The rise of Chinese EV makers such as Geely is also pressuring BYD, the country's top automaker, which saw its domestic passenger car sales decline the past few months. China this week pledged to rein in 'irrational competition' in its EV sector after BYD and other automakers cut prices to lure buyers. For Wall Street, partsmakers look like a bright spot. With car manufacturers facing intense political pressure to forgo price increases as tariffs hit, auto suppliers are showing signs of being able to pass along that expense. In Europe, for example, analysts favor tiremakers in particular as the companies successfully raise prices to offset US tariff costs, which Citigroup Inc. says reflects an early pass-through to consumers. 'We think more local players, especially Michelin, can benefit from this trend in a profitable way,' analysts led by Ross MacDonald wrote in a note this week. Dey, MacDonogh and Yang write for Bloomberg.
