Tariffs force automakers to dim outlook

An escalating trade war and steep tariffs on steel and aluminum is putting pressure on earnings for automakers, prompting General Motors to slash its outlook while also weighing down shares of Ford Motor Co. and auto parts companies.

GM cited “recent and significant increases in commodity costs” for why it now expects 2018 profits of $5.14 a share, down from its previous forecast of $6 and below analysts’ expectation of $6.42.

Last month, German automaker Daimler AG lowered its 2018 earnings outlook, due in part to increased import tariffs for U.S. vehicles in China.

The company said it now sees fewer SUV sales and higher costs at its Mercedes-Benz cars division than previously expected as a result of the tariffs, and “this effect cannot be fully compensated by the reallocation of vehicles to other markets.” Daimler produces vehicles in the U.S.

President Donald Trump in late May imposed steep tariffs on steel and aluminum coming out of Canada, Mexico and the European Union.

The 25 percent tariff on steel and 10 percent tariff on aluminum, which took effect in June, have driven up costs sharply as domestic producers raise prices.

The Center for Automotive Research last week estimated that the potential import taxes of 20 percent to 25 percent on autos and auto parts would raise the price of an average car by $4,400. The duties would eliminate more than 714,000 U.S. jobs.