GM Stock Falls After $1.1 Billion Hit From Tariffs

GM’s U.S. car sales rose 12% year over year in the first half of 2025. Investors want to know how the second half of the year is shaping up when GM reports second-quarter earnings on Tuesday morning. (Eric Thayer/Bloomberg)

General Motors reported solid second-quarter earnings amid a challenging operating environment. Investors, it seems, wanted more.

GM on Tuesday reported an operating profit of $3 billion and earnings per share of $2.53 from sales of $47.1 billion. Wall Street was looking for an operating profit of $2.9 billion and earnings per share of $2.33 from sales of $46.3 billion, according to FactSet.

In the second quarter of 2024, GM reported an operating profit of $4.4 billion and earnings of $3.06 a share from sales of $48 billion. Part of the reason for lower earnings is tariffs on imported cars. In 2024, about 45% of the vehicles GM sold domestically were imported, mainly from Mexico and South Korea. Tariff impacts in the latest second quarter amounted to $1.1 billion, according to the company.

Guidance for the full year was unchanged. GM still expects a 2025 operating profit of between $10 billion and $12.5 billion. The “gross” impact from tariffs is still expected to be $4 billion to $5 billion, with GM hoping to offset “at least” 30% of it through “manufacturing adjustments, targeted cost initiatives, and consistent pricing.”

Guidance implies second-half operating profit of between $3.5 billion and $6 billion. Wall Street currently projects $5.1 billion.

Shares lost 8.1%, closing at $48.89 on Tuesday, while the S&P 500 and Dow Jones Industrial Average rose 0.1% and 0.4%, respectively.

“While tariffs will likely dominate the headlines, the performance was better-than-expected in one of the more unpredictable quarters in history,” wrote Citi analyst Mike Ward in a Tuesday report.

CFRA analyst Garrett Nelson believes investors wanted a guidance raise. GM also paused share buybacks in the second quarter—that might have also disappointed investors who wanted to see more capital returned. Share buybacks, however, resumed in July, he wrote.

Overall, results looked OK. The starting point might have something to do with the drop reaction. Coming into Tuesday, GM shares had risen about 20% over the past three months.

To be sure, it’s a difficult operating environment. Along with tariffs, GM is navigating policy changes and weakening consumer demand.

The federal $7,500 purchase tax credit is being phased out in September as part of President Donald Trump’s recently passed tax-and-spending bill. That could create a rush to buy EVs in the third quarter and an air pocket for demand in the fourth.

The loss of the tax credit and tariffs is putting pressure on vehicle affordability. “Inventory for new cars under $30,000—a segment where 92% of vehicles are imported—has shrunk for three consecutive months,” said Cars.com in its July industry report.

Higher prices can put pressure on new car sales, which were surprisingly strong in the first half of 2025. GM’s U.S. sales rose 12% year over year. Some of that demand, however, might have been pulled forward by changing policies.

Options markets implied the stock would move about 5%, up or down, following earnings. Shares moved about 8% following the prior four earnings reports, rising once and falling three times over that span.

Write to Al Root at allen.root@dowjones.com