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Miami Herald
10 hours 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
16 hours 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
5 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.
Malaysian Reserve
28-06-2025
- Business
- Malaysian Reserve
Trump ends Canada trade talks in retaliation over digital tax
PRESIDENT Donald Trump said he was ending all trade discussions with Canada in retaliation for the country's digital services tax and threatened to impose a fresh tariff rate within the next week. 'Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately. We will let Canada know the Tariff that they will be paying to do business with the United States of America within the next seven day period,' Trump posted Friday on social media. Treasury Secretary Scott Bessent said on CNBC that he expects the administration will launch a so-called Section 301 investigation into Canada, a tool the US has used against other countries including China, which may lead to higher import taxes. Canada and the US have one of the world's largest bilateral trading relationships, exchanging more than $900 billion of goods and services last year. But the alliance has grown tense since Trump won the election. The president threatened 25% tariffs on imports from Canada and repeatedly said he thinks it should become the 51st US state. Since taking office, he has put taxes on steel, aluminum and automobiles and other goods. In response, many Canadians have boycotted US products and avoided travel to US destinations. Canadian Prime Minister Mark Carney, speaking briefly on his way out of a meeting on Friday, said he hadn't spoken with Trump since his post. 'We'll continue to conduct these complex negotiations in the best interests of Canadians,' he said. The Canadian dollar dropped more than 0.5% almost immediately after Trump's post before reversing those losses. Canada's benchmark equity index fell, ending the day down 0.2%, and the shares of companies that rely on moving goods across the border, including General Motors Co. and apparel maker Canada Goose Holdings Inc., also took a hit. Dozens of countries face a July 9 deadline for Trump's higher tariffs to kick back into place, and have been engaged in negotiations with the US. That deadline doesn't apply to Canada and Mexico. The president imposed tariffs on the US's North American neighbors earlier this year over fentanyl trafficking and migration concerns, and talks with them are being handled on a separate track. Last week, Trump and Carney met at the Group of Seven leaders' summit and agreed to try to hash out an agreement by the middle of July. Business groups and some politicians quickly applied pressure on Carney to drop the digital tax. 'In an effort to get trade negotiations back on track, Canada should put forward an immediate proposal to eliminate the DST in exchange for an elimination of tariffs from the United States,' said Goldy Hyder, chief executive officer of the Business Council of Canada. Ontario Premier Doug Ford reiterated his call for the prime minister to abandon the digital tax. 'We've long supported the idea that global tech giants should pay their fair share in the countries where they operate. But the digital services tax hasn't achieved that,' the Council of Canadian Innovators, which represents technology executives, said in a statement. 'It's functionally a pass-through cost paid by Canadian advertisers and consumers, and it leaves our economy exposed to draconian trade retaliation.' Bessent on Thursday announced a deal with other G-7 countries that will exclude US companies from some taxes imposed by other countries in exchange for removing the Section 899 'revenge tax' from the administration's tax bill. However, the deal didn't address digital services taxes, which are in place in a number of countries but are opposed by Trump and his officials. Canada's digital tax isn't new. It was passed into law a year ago but companies haven't had to pay it yet. The government will proceed with implementing it, with the first payments due Monday, Canada's finance department said earlier Friday, before Trump's post. Business groups had warned it would increase the cost of services and invite retaliation by the US. A group of 21 US lawmakers wrote to Trump earlier this month asking him to push for the tax's removal, estimating it will cost American companies $2 billion. Trump has long railed against taxes and other non-tariff barriers, casting them as an impediment to US exporters. 'We were hoping as a sign of goodwill that the new Carney administration would at least put a brake on that during the trade talks,' Bessent said on CNBC. 'They seem not to have.' The US specifically asked for a 30-day delay in the tax when Trump and Carney met at the G-7, according to Kevin Hassett, Trump's National Economic Council Director, who spoke Friday in an interview with Fox Business. The Canadian digital services tax is similar to those implemented by other countries, including the UK. The levy is 3% of the digital services revenue that a firm makes from Canadian users above C$20 million ($14.6 million) in a year. It would apply to megacap technology companies including Meta Platforms Inc., Alphabet Inc. and Inc. and has been criticized by smaller players including Uber Technologies Inc. and Etsy Inc. 'We are disappointed by the Canadian government's decision to implement a discriminatory tax that will harm Canadian consumers, and we hope that this matter can be quickly resolved,' a spokesperson for Amazon said in an emailed statement. Canadian Finance Minister Francois-Philippe Champagne suggested last week that the digital tax may be renegotiated as part of US-Canada trade discussions. 'Obviously, all of that is something that we're considering as part of broader discussions that you may have,' he said. –BLOOMBERG
Mint
24-06-2025
- Automotive
- Mint
Trump's Chip Tariff Threat Sparks Pushback From Auto Industry To Tech
Blowback to President Donald Trump's idea of tariffs on imported semiconductors is proving to be broad and deep, stretching from auto companies and boat makers to the technology industry and crypto enthusiasts, according to a review of more than 150 public comments on the proposal. The possible levy of up to 25% has united rivals like Tesla Inc., General Motors Co. and Ford Motor Co. in voicing reservations. It's brought together industry lobbies from the Crypto Council for Innovation to the National Marine Manufacturers Association. Even Taiwan and the People's Republic of China are finding common cause, along with predictable parts of the tech sector including chipmakers and wireless providers. The reason is that chips are now in almost everything: refrigerators and microwaves, tire pressure sensors and navigation systems, electronic bidets and sonar equipment and, of course, smartphones and computers. Tariffs threaten to snarl supply lines and jack up costs for consumers. 'There's a large mismatch between the amount of chips we use in this country in various products and the supply created here in the US,' JoAnne Feeney, a partner and portfolio manager at Advisors Capital Management, said in an interview. 'Putting a tax on those imports will simply raise the cost, and that's not a good thing for consumers.' Case in point is the marine association, which warns the impact would be felt by more than 1,300 manufacturers who face higher expenses for essentials like propulsion technology, engines and GPS systems. 'These systems are not optional luxuries — they are fundamental to safety, function and performance,' the association said. 'Many components have no US equivalent or are only available from highly concentrated suppliers overseas.' The boating sector's concerns were among comments from 154 stakeholders submitted to a Commerce Department review of whether to slap tariffs on chips as part of Trump's campaign to redraw global supply lines and boost domestic manufacturing. Predictable tech sources weighed in, including chipmakers Taiwan Semiconductor Manufacturing Co. and Intel Corp. But feedback also landed from a wide spectrum of sectors, along with trading partners like Japan and Brazil. The companies, trade groups and individuals who commented on the chips investigation largely signaled support for the president's vision of deepening the US manufacturing base and expanding the American workforce. Yet most expressed concern over the potential consequences and urged making any levies that emerge as targeted as possible. Taken together, the filings point to unease across a range of industries about the economic fallout from targeting chips. Trump has so far brushed off many of those concerns and cited plans by a range of companies to invest in the US, including Taiwan-based TSMC's decision to boost its commitment to building plants near Phoenix. White House spokesman Kush Desai said Trump remains committed to reshoring manufacturing critical to US national security. 'While the Commerce Department completes its Section 232 investigation, the administration is expanding domestic critical mineral production, slashing regulations, and pushing pro-growth policies,' Desai said in a statement. The Commerce Department didn't respond to a request for comment. In its submission, TSMC highlighted plans for six advanced semiconductor fabs and two packaging facilities along with a research center as part of a $165 billion investment in Arizona that's expected to create thousands of jobs. Yet the company warned import levies would make it harder to deliver those projects on schedule, while slowing US efforts to expand domestic production of chips for 5G wireless, artificial intelligence and autonomous driving. 'Additional tariffs or other restrictive measures on semiconductors could reduce the profitability of leading US companies by limiting sourcing options, driving up production costs, and reducing product demand,' TSMC's Arizona subsidiary wrote. In its filing, Tesla urged coordination between government and industry to minimize uncertainty that could upset supply chains, citing its ties to Asia, Europe and Africa. 'These partnerships allow us to focus on increasing US dominance in advanced manufacturing,' the company wrote. 'Impacts to these inputs for which there is insufficient domestic availability will put a strain on resources during a key moment in the global artificial intelligence race.' Chipmaker Intel cautioned that trading partners could respond with protective measures that exclude American products. Intel is seeking to reverse years of struggle by spending more than $100 billion to expand its domestic manufacturing, and the company called on the administration to spare US-made wafers as well as any chips made abroad using American technology. A common concern aired by TSMC, Intel and others in the semiconductor industry centered on the risk that chipmaking equipment produced by foreign suppliers like ASML Holding NV would get hit with import taxes. A single extreme ultraviolet lithography machine from Netherlands-based ASML, the world's sole provider of the most advanced chipmaking gear, can cost nearly $400 million. Adding tariffs would significantly boost the cost of equipping new US facilities. ASML submitted feedback to the Commerce Department — but its filing was marked 'business confidential' and unavailable for public review. In its comments, Intel urged exempting such machines, noting that 'the primary cost driver for semiconductor fabs, accounting for two-thirds of total construction expenses, is equipment and machinery.' Replacing semiconductors produced abroad with domestic output would be very difficult, Feeney said. 'It takes years to create the industrial infrastructure to make creating a semiconductor fabrication facility even possible,' she said. 'At a time we're trying to build up an AI infrastructure of data centers, the last thing you want to do is put a substantial tariff on the most important input into those data centers.' Major US trading partners, already stung by Trump's so-called reciprocal tariffs, objected to the idea of targeting chips, after seeing the auto sector along with steel and aluminum imports hit with levies. Taiwan, which produces nearly 90% of the world's most advanced semiconductors, highlighted the complementary role of TSMC foundries that churn out wafers for leading American chip designers Nvidia Corp. and Advanced Micro Devices Inc. Tariffs on semiconductors or related products from the island 'would severely impair Taiwan's ability to meet the demands of the US semiconductor industry in a timely manner,' the Taiwanese government said in its filing. 'This would drive up costs for US companies, raise end-product prices, reduce profitability and revenue, and ultimately weaken the capacity of US firms to invest in R&D and innovation.' With assistance from Catherine Lucey. This article was generated from an automated news agency feed without modifications to text.
