How General Motors Plans to Mitigate the Impact of Higher Import Duties
General Motors is preparing to offset the potential impact of new U.S. tariffs on automotive imports, leveraging its experience in crisis management to maintain supply chain stability. Speaking at an investor conference, CFO Paul Jacobson expressed confidence in GM’s ability to adapt to policy shifts, citing the company’s proactive approach to inventory management and production flexibility.
“We can’t be surprised where we are today,” Jacobson said, referring to the Trump administration’s focus on addressing the U.S. trade deficit. Since taking office, the administration has introduced tariffs on select imports, including raw materials such as aluminum and steel, and now plans a 25% duty on automotive imports. Acknowledging the policy direction early allowed GM to take preemptive steps to mitigate disruption.
Supply Chain Readiness and Inventory Management
In anticipation of trade policy changes, GM reduced its international plant inventory by 30%, a move designed to avoid stockpiling unfinished products that could suddenly become significantly more expensive. This effort involved close coordination with logistics partners to expedite shipments before any tariffs took effect. “The last thing you want is a bunch of unfinished inventory that just suddenly became 25% more expensive just with the passage of time,” Jacobson explained.
The automaker’s response draws on lessons learned during the pandemic when it had to manage semiconductor shortages and other disruptions. Jacobson credited GM’s ability to react quickly, noting that the company has become increasingly tactical in its approach to managing uncertainty. “The one thing I think the management team should get more credit for is its ability to handle adversity,” he said.
Strategic Adjustments to Offset Tariff Costs
GM is evaluating multiple strategies to absorb the impact of the proposed tariffs, aiming to offset a portion of potential cost increases. GM produced over 500,000 vehicles in Mexico and more than 112,000 in Canada in 2024, with most destined for the U.S. market. Shifting production or optimizing sourcing decisions could help cushion the financial impact of new tariffs.
Trump’s decision to delay a 25% tariff on goods from Mexico and Canada until March has given manufacturers additional time to refine mitigation strategies. However, with a separate automotive duty set to begin on April 2, GM is closely monitoring developments while ensuring its supply chain remains agile.
Long-Term Considerations for U.S. Manufacturing
While GM is prepared to make short-term adjustments, Jacobson acknowledged that if tariffs become permanent, the company may need to reconsider its broader manufacturing footprint. Expanding domestic production as a countermeasure is not necessarily a straightforward solution, as it would require significant capital investment. “Think about a world where on top of that, we’re spending billions of dollars in capital, and then it ends,” Jacobson noted. “So we can’t be whipsawing the business back and forth.”
As trade negotiations continue, GM remains focused on strategic flexibility rather than reactive spending. The company’s approach highlights the challenge automakers face in balancing cost efficiency, production strategy, and regulatory uncertainty in a shifting global trade landscape.
