What Happened?
Shares of automotive manufacturer General Motors (NYSE: GM) fell 5.2% in the afternoon session after President Trump announced plans to double tariffs on steel and aluminum imports to 50%.
Automakers rely heavily on these raw materials for vehicle production, and a tariff hike would directly increase production costs and reduce profits. For investors, this could also signal downward pressure on earnings, potential cuts to forward guidance, and increased uncertainty.
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What The Market Is Telling Us
General Motors’s shares are somewhat volatile and have had 13 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago when the stock dropped 11.1% on the news that the company reported weak fourth-quarter 2024 earnings and provided guidance that assumed a stable policy environment in the US, thus failing to help investors shrug off concerns relating to the impact of regulatory measures.
A key concern is the Trump administration's potential plans to reduce incentives like tax credits, which have helped accelerate the demand for EVs. If these plans are implemented, both GM and other EV players may need to rethink their growth forecasts.
A Berstein analyst added following the earnings release "In our view, the guidance for 2025 leaves no room for errors, and also does not include impact from regulatory changes in the U.S., especially on tariffs and BEV support."
On a more positive note, General Motors beat analysts' revenue expectations, and its full-year EPS guidance came in higher than Wall Street's estimates. Overall, this was a mixed quarter, which failed to clear up uncertainties.
General Motors is down 8% since the beginning of the year, and at $47.27 per share, it is trading 21.5% below its 52-week high of $60.20 from November 2024. Investors who bought $1,000 worth of General Motors’s shares 5 years ago would now be looking at an investment worth $1,724.
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