Shares of General Motors fell sharply on Tuesday after the automaker disclosed a $1.1 billion hit from tariffs in its second-quarter earnings report, raising concerns about profitability despite results that exceeded Wall Street estimates.
The company posted an operating profit of $3 billion and earnings per share of $2.53 on revenue of $47.1 billion. Analysts had expected $2.9 billion in operating profit and $2.33 per share in earnings, according to FactSet. Compared to the same quarter last year, however, profits declined. In the second quarter of 2024, GM reported an operating profit of $4.4 billion and earnings of $3.06 per share on $48 billion in revenue.
The decline in earnings was largely attributed to tariffs on imported vehicles. Approximately 45 percent of GM’s domestic sales this quarter came from imported models, primarily from Mexico and South Korea. The financial burden from those tariffs totaled $1.1 billion in the quarter.
Despite the setback, GM left its full-year guidance unchanged, maintaining expectations for 2025 operating profit between $10 billion and $12.5 billion. The company anticipates that the total gross tariff impact will land between $4 billion and $5 billion. GM plans to mitigate about 30 percent of those costs through changes in manufacturing, tighter cost controls, and stable pricing strategies.
Based on the current guidance, the automaker’s operating profit for the second half of the year is projected to range from $3.5 billion to $6 billion. Analysts are currently forecasting $5.1 billion for that period.
The market response was swift. GM shares closed down 8.1 percent at $48.89 on Tuesday, even as broader indexes posted modest gains. The S&P 500 rose 0.1 percent and the Dow Jones Industrial Average climbed 0.4 percent.
Analysts were mixed in their interpretations. Some noted that while tariffs dominate headlines, GM’s performance remained relatively strong in an uncertain market. Others pointed to the company’s decision to pause share buybacks in the second quarter as a potential factor in the stock’s drop. The buybacks resumed in July, but the temporary halt may have disappointed investors expecting more immediate returns.
The broader environment adds further pressure. GM faces not only tariff-related costs but also shifting federal policy and weakening consumer demand. A federal $7,500 tax credit for electric vehicle purchases is set to expire in September under legislation recently passed by President Trump. That could lead to a spike in EV sales in the third quarter, followed by a significant slowdown in the final months of the year.
Affordability is becoming a growing concern. According to a July report from Cars.com, inventory for new vehicles priced under $30,000 has declined for three consecutive months. The vast majority of vehicles in this category are imported, compounding the effects of tariffs.
Despite a 12 percent increase in GM’s U.S. vehicle sales year over year in the first half of 2025, some of that demand may have been driven by anticipation of expiring incentives. With those supports disappearing and tariffs increasing costs, GM could face a more challenging market in the quarters ahead.
