This year has thrown a few curveballs at major automakers such as General Motors (GM +0.42%) and Ford Motor Company (F 0.38%). The Detroit automakers have done well navigating choppy waters that include the implementation of tariffs on imported vehicles and automotive parts (as well as other, broader tariff implications) and the removal of the $7,500 federal electric vehicle (EV) tax credit that threw industry demand into flux. On that note, there's a bit of good news for GM and Ford investors when it comes to the high cost of tariffs.
What's going on
Easily one of 2025's biggest developments for automakers was the implementation of tariffs. It caused changes in what vehicles automakers produced and where, among other long-term strategic changes. The tariffs also added billions in costs to major automakers, but recently the Trump administration has expanded the list of parts subject to auto tariffs in a move that should reduce costs.
For automakers making supply chain decisions can come down to a choice of the lesser evils and avoiding the worst of the tariff options. "It's better to have those at 25 percent -- or, if you're coming from the EU, Japan or the U.K., a lower percentage -- than potentially having the reciprocal tariff apply or having a tariff on 50 percent of the steel value," said Jennifer Smith-Veluz, an international trade attorney at Detroit law firm Butzel, according to Automotive News.
Image source: Ford Motor Company.
The list of parts has grown to include touchscreen displays, speakers, and more varieties of drive axles and engine components. Even better, some auto parts from Canada and Mexico might be excluded as the parts tariff includes an exemption that automakers can claim for components that comply with the United States-Mexico-Canada Agreement's rules for preferential treatment.
In other good news, the Trump administration also said it would extend its tariff offset program, which was scheduled to be phased out in 2027, through April 2030. The program allows automakers to apply for an offset equal to 3.75% of the aggregate sticker price of vehicles produced in the U.S.
NYSE: F
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What it all means
The administration also plans to create a similar program to offset tariff costs for U.S. engine production, signaling more broadly that there could be more relief for automakers. It's great news, and investors are already seeing some of that optimism from automakers during earnings reports. General Motors now estimates tariffs will cost the company $3.5 billion to $4.5 billion, or $500 million less than originally estimated, while Ford was able to halve its tariff cost estimate from $2 billion to $1 billion.
It's important for investors to keep up to date on policy changes because they're influencing billion-dollar decisions. One example was GM's recent decision to invest $4 billion in its U.S. manufacturing plants, enabling the company to assemble 2 million vehicles domestically. All in all, it's at least a little bit of good news that the administration appears willing to work with automakers and extend more tariff relief.
