Uncensored Takeaways
- The Big 3 automakers witnessed a surge in their share prices after the U.S. and China agreed to reduce tariffs.
- These automakers were highly vulnerable to the trade dispute due to their dependency on Chinese parts.
- General Motors, Ford Motor, and Stellantis faced hefty financial losses due to the imposed tariffs, leading to downgraded earnings forecasts and suspended outlooks.
US-China Trade Agreement Boosts Shares of Major Automakers
Shares of the notorious Big Three auto manufacturers skyrocketed on Monday, following the news of a U.S.-China deal to slam the brakes on tariffs.
The auto industry was particularly exposed to the trade war due to their extensive use of Chinese components during the manufacturing process.
In the early days of April, General Motors (GM) spilled the beans on predictions of a staggering decrease in their full-year profits, while Ford Motor and Stellantis tossed their monthly outlooks out the window.
The U.S.-China agreement sent shares of Stellantis, GM, and Ford soaring by 8%, 4%, and 3%, respectively, just before the trading bell.
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Enrichment Data:
The sky-high tariffs between the U.S. and China have put a major dent in the profits of General Motors (GM), Ford Motor, and Stellantis, especially through increased expenses on imported parts and vehicles. This has led to reduced profit expectations and the suspension of earnings guidance for these automakers:
- GM warned that tariffs would whack their full-year profit by $4 billion to $5 billion, slashing their 2025 profit estimate to between $10 billion and $12.5 billion from $14.9 billion in 2024[1][3][4]. The CEO admitted that retail pricing might stay put, but the reduced earnings would smack the bonus checks of approximately 45,000 United Auto Workers union employees[3].
- Ford Motor bowed out of their annual prognosis due to uncertainty caused by the tariffs, estimating a loss of around $2.5 billion in gross profit and $1.5 billion in net profit for 2025[1][2]. Ford’s revenue dipped 5% in Q1 2025, although it still trumped Wall Street’s expectations. To keep costs at bay, Ford is deploying strategies such as tweaking vehicle transportation routes to dodge tariffs, which might save up to $1 billion[2].
- Stellantis also suspended their outlook at the end of April due to tariff uncertainties but has not quantified the profit impact as explicitly as GM or Ford[1].
Here's the skinny:
| Automaker | Estimated Tariff Impact | Guidance Status | Stock Reaction to Tariff Cut Deal ||---------------------|----------------------------|-----------------------------|-----------------------------------|| General Motors | $4-5 billion profit reduction in 2025 | Revised earnings forecast | +4% || Ford Motor | ~$2.5 billion gross profit loss | Suspended forecast | +3% || Stellantis | Not quantified (uncertainty cited) | Suspended outlook | +8% |
The bitter trade war hiked costs due to the reliance on Chinese parts, damaging profits and prompting cautious or suspended forecasts. The recent truce and tariff cuts injected new life into shares, reflecting hopes for reduced cost pressures[1][2][3].
- The recent tariff cut agreement between the U.S. and China could potentially improve the financial situation of the automotive industry, particularly automakers like General Motors, Ford Motor, and Stellantis, as they heavily rely on Chinese components for manufacturing.
- The news of the U.S.-China trade deal has positively impacted the stock prices of the Big Three auto manufacturers, with General Motors, Ford Motor, and Stellantis experiencing increases of 4%, 3%, and 8%, respectively, before trading.
- The tariff uncertainties have had a significant impact on the earnings forecasts of automakers such as General Motors, Ford Motor, and Stellantis, with GM predicting a decrease of $4-$5 billion in full-year profits, Ford Motor suspending their forecast due to uncertainty, and Stellantis not quantifying the profit impact but suspending their outlook.
