General Motors lowered its earnings outlook for the remainder of the year as higher steel and aluminum prices from President Trump’s tariffs curbed profitability and fueled global trade tensions.
The Detroit-based car manufacturer is one of several businesses to publicly oppose President Trump’s duties on steel and aluminum imports, as well as a proposed 25 percent levy on imported cars and parts. GM previously warned the charges could disrupt its worldwide supply chain, forcing the manufacturer to shrink and lay off workers.
The company reported a slight decrease in revenue to $36.8 billion for the three-month quarter that ended on June 30 and cited future risks including “economic tensions between governments and changes in international trade policies.”
Profits in the U.S. dropped 23 percent to $2.7 billion, the carmaker said, and worldwide retail vehicle sales dipped 12 percent to 2 billion.
“We faced significant external challenges, but delivered solid results,” Chief Executive Officer Mary Barra said in a statement that highlighted rising costs for raw materials such as metals.
Barra told investors the company expects the volatility from the tariffs to extend into the second half of 2018. Chief Financial Officer Chuck Stevens said GM has already mitigated nearly $1 billion in losses and will continue to eye price increases on suppliers and consumers to blunt the impact of the tariffs.
“We’re going to be competitive in the market,” he said on the company’s earnings call. “To the extent that we have opportunistic ability to pass along some [costs] we will.”
GM’s stock dropped 7.26 percent to $36.61 per share in New York trading on the earnings results.
[Also read: Carmakers’ credit can handle strain of Trump’s tariffs, Fitch says]
The company’s concerns about auto tariffs, detailed in its response to a Commerce Department investigation of whether they are needed to protect national security, reflect broad concern from business and lawmakers in the president’s own party that the White House’s protectionist trade policies will undermine the U.S. economy.
The levies imposed on steel and aluminum imports, also on national security grounds, have already prompted retaliation from long-time U.S. allies like Canada and Europe and spurred motorcycle-maker Harley Davidson to move some production outside the U.S.
“The threat of steep tariffs on vehicle and auto-component imports risks undermining GM’s competitiveness against foreign auto producers by erecting broad-brush trade barriers that increase our global costs, remove a key means of competing with manufacturers in lower-wage countries, and promote a trade environment in which we could be retaliated against,” the carmaker warned.
