Carmakers worried Trump’s tariffs would shred their bottom lines. Here’s how they avoided the worst of it

By Chris Isidore, CNN

(CNN) — When President Donald Trump introduced his tariff policy earlier this year, it looked like a disaster for automakers. But even with US tariffs on imported cars and parts, it has shaped up to be a pretty good time for car companies.

Most automakers, even US-based ones, import some cars and most parts. But car companies’ dire cost estimates have decreased as tariffs keep getting rolled back, bit by bit.

More importantly for automakers’ bottom lines, the financial penalties for not meeting fuel efficiency rules have all but vanished. Those regulatory savings could eventually offset the cost of tariffs.

All in all, one could argue that auto industry profits could end up better off than they were before Trump took office in January, a surprising outcome as automakers’ huge investments in electric vehicles in recent years were also being undercut by Trump pulling the plug on the federal support of electric vehicles they had counted on when making that massive bet.

“It’s definitely favorable,” said Jeff Schuster, an independent auto analyst about the changes since auto tariffs were first announced in March. “There are so many moving pieces, it’s hard to isolate. But things are definitely better off than anyone expected.”

Tariff costs not as bad as feared

Automakers were close to panic when Trump announced plans for a 25% tariff on all imported vehicles, including those from Mexico and Canada, since all companies depend on imported parts to build at US assembly plants and almost all import from those neighboring countries. Ford CEO Jim Farley said the tariffs “would blow a hole in the US industry that we’ve never seen.”

But it turned out it wasn’t as bad as they feared, as Trump continued to reduce the worst of the duties’ impact almost immediately. General Motors and Ford, which had forecast billions in annual costs, have each reduced those assessments. GM trimmed its $5 billion estimate by $500 million last month. Ford cut its estimated tariff cost for 2025 in half, from $2 billion to $1 billion.

Volkswagen reported a 1 billion euro loss ($1.3 billion) in the third quarter and said that the tariffs would cost it up to $5.8 billion this year. But some of the loss was due to other problems with its European EVs and a reorganization at Porsche.

While tariff costs have also trimmed automakers’ profits, companies managed to beat expectations. For example, GM’s adjusted earnings per share had been forecast to fall 23% in the third quarter. Instead, it fell just 5%. Even the Volkswagen loss was less than a quarter of forecasts.

Even automakers from Asia and Europe have been able to weather the storm, since they build a significant share of their US-sold vehicles in America.

Hyundai CEO José Muñoz told reporters in New York in September that even with the US tariffs, the United States, not South Korea, is Hyundai’s most profitable market. He expects that to continue.

“Tariffs are still a headwind,” said Dan Ives, analyst with Wedbush Securities. “But so far they’ve been digested well.”

And further tariff reductions are likely if the administration reaches a new trade deal with Canada and Mexico — two of the largest sources of imported cars and auto parts.

Trump recently halted Canadian trade negotiations after an ad funded by the province of Ontario featured a 1987 anti-tariff speech by former President Ronald Reagan. But experts think there will be some kind of trade deal in the future.

A free trade deal with South Korea, another source of imported vehicles, would also help reduce tariff costs for not just Hyundai and Kia but also General Motors, which builds some of the cheaper cars at its US dealerships in South Korea.

The blunted tariff impact has also benefitted car buyers.

Companies have not passed on the increased tariff costs to consumers, at least not directly. However, there have been some quiet moves by automakers to recoup some of the costs of the duties, such as charging for equipment that had once been included in the price, or ending production on less profitable models.

As a results, the average price of a new car purchase stands at just around $50,000, according to estimates from Edmunds and Kelley Blue Book, up about 4% from a year ago.

Big savings from regulatory changes

While tariffs capture most of the headlines about government action, there’s been a less publicized windfall for automakers: the end of financial penalties for violating emissions standards.

In the past, automakers avoided fines for selling too many gasoline vehicles by purchasing so-called regulatory credits from companies that fell below emission standards, like electric vehicle maker Tesla.

But those penalties were eliminated in July’s tax and spending bill, saving the automakers billions. Ford CFO Sherry House told reporters last month it will no longer purchase the $2.5 billion worth of regulatory credits it had planned to buy in the future.

Ives said that no longer having to buy credits should reduce the cost of building a vehicle by 3% to 5%. Automakers can also ramp up sales of the more profitable large trucks and SUVs that were previously capped by emissions levels.

In fact, Ford announced it was increasing production of its F-150 and F-Series Super Duty in 2026 by more than 50,000 trucks to meet demand. GM also revealed plans to shift production of one of its Michigan plants from EVs, which have been losing money, to profitable gasoline powered vehicles.

“As the regulatory costs go away, that does paint a much better picture for the health of the industry than anyone thought would be passed,” said Schuster. “The near-term outlook is much more favorable than in April.”

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