Trump’s Tariffs Pick the Pockets of Auto Workers and Shareholders

“What’s good for General Motors GM is good for the country, and vice versa,” is a famous 1953 slight misquote attributed to former GM president Charlie Wilson. While GM is far less influential for the nation’s economic prosperity, it’s still reasonable to postulate that what’s bad for GM is bad for the country. 

The Trump administration has proposed tariffs, significantly harming the auto industry and GM in particular. For Ford F and GM, a 25% tariff on autos imported from Canada and Mexico, with car parts to follow, will cost billions, likely wiping out most or all their automotive profits. JP Morgan estimates the auto-related tariff will cost GM $14 billion, which equals all of its global profits, while tariffs will cost Ford $6 billion, the vast majority of its global profits.

The treatment of Ford and GM by Trump is entirely unfair. These companies played by the rules of the USMCA, formerly NAFTA, that President Trump negotiated and touted the “fairness and reciprocity of the deal” when he signed it in 2018. Now, he’s turned back on the USMCA and intends to have the government take most, if not all, of the automakers’ profits.

The USMCA’s concept was, in part, to help automakers efficiently manufacture in North America to help best compete with China. Mark Fields, former CEO of Ford, lamented that upending the deal overnight throws domestic automakers into chaos, which only helps China. Conveniently, Tesla TSLA has no immediate tariff-related effects due to its domestic manufacturing footprint.

GM had a solid financial picture entering 2025, with strong free cash flow, buybacks, debt reduction, and reliable execution under-appreciated by Wall Street. Now, the financial outlook for the company, its shareholders, and workers has declined dramatically due to Trump’s lousy policy.

Profit-Sharing Bonuses Eviscerated for Union Workers

Last year, GM paid out $14,500 in record-setting profit-sharing bonuses to almost 50 thousand union workers, up from $12,250 in 2023 — equal to over two months of pay. Ford paid profit-sharing bonuses of $10,400 to 58 thousand hourly workers last year. (Bonuses are formulated on EBIT profitability.) Thanks to Trump’s profit-destroying tariffs, all these workers will receive closer to zero in annual bonuses in the foreseeable future.

Big Government Overreach

Republican administrations in the past have offered less government interference in business; now, the government has decreed that profits will go back to the State instead of to workers and shareholders because the rules have now arbitrarily and capriciously changed.

Government officials think they know best how to manage these businesses for the greater good and are dictating to management how to run their companies. Where incentives were once offered to attract manufacturing, now the government is punitively taking the vast majority of auto companies’ profits to force change. Yet, with the government grabbing tens of billions of profits, auto companies will have more difficulty funding innovation and complying with government demands to build costly domestic plants. 

When the Trump administration reports the billions in tariff revenue the U.S. accrues, left unsaid will be the large offset from the decline in taxes paid on corporate profits and income taxes no longer paid on worker bonuses from the auto sector, just for starters. The massive tariff-imposed tax U.S. consumers pay for higher costs on autos and other goods will be the other offset for the government revenue, leaving families much poorer.

The Investment Climate Has Darkened

Trump’s tariff policy is so bad that investors hope the president will change course. After all, he's known for using extreme positions as negotiating tactics, and these might not be the final tariffs that take effect. 

History shows that tariffs of this magnitude lead only to economic destruction. With big government impinging on capitalism, it’s certainly no wonder that investors have chosen to flee the stock market. Policy that’s bad for GM is a canary in a coal mine for what’s bad for America.

At the time of publication, Ginesin was long GM.