History Says What the 2025 Auto Tariffs Cost General Motors, and Canada's Rate Is About to Double

On Monday, President Donald Trump said tariffs on Canadian cars, trucks, auto parts, and steel will rise to 50% on Jan. 1, 2027. He wrote on Truth Social that companies building in the U.S. face "ZERO TARIFFS," citing a $60 billion trade deficit with Canada.

The escalation is already partly in force. A separate round of 50% tariffs on about $20 billion of Canadian goods took effect early Saturday, after trade talks between the two countries collapsed. And Canada is retaliating from Sept. 8, though Prime Minister Mark Carney said Monday it may stop short of matching U.S. tariffs dollar for dollar.

For General Motors (NYSE:GM), Monday's announcement is a doubling. The tariff on Canadian-built vehicles has stood at 25% since the spring of 2025.

Yet while Ford and Stellantis each fell more than 3% on Monday, GM slipped about 1%. The muted reaction isn't complacency, I'd argue. After all, investors have now watched a full tariff cycle play out at GM, and it cost less than forecast.

Image source: Getty Images.

What did the last round cost GM?

When the 25% tariffs arrived in the spring of 2025, GM cut its full-year guidance to absorb a potential $4 billion to $5 billion hit. The early costs were heavy. The company incurred $1.1 billion of tariff expense in the second quarter of 2025 alone, and its core profit that quarter fell about 32% year over year.

But the bill kept shrinking. By last October, GM had trimmed the expected 2025 impact to between $3.5 billion and $4.5 billion, down from the original range.

"Through the third quarter, we incurred $2.4 billion in gross tariff costs. In the fourth quarter, we incurred another $700 million bringing the total for the year to $3.1 billion," chief financial officer Paul Jacobson said on the company's fourth-quarter earnings call in January.

The final bill came to $3.1 billion against an original forecast of up to $5 billion. Management said it offset more than 40% of the gross cost through pricing discipline and manufacturing adjustments. Even carrying the full expense, GM earned $12.7 billion of adjusted operating profit in 2025.

Higher guidance anyway

The pattern has continued into 2026. GM expects $2.5 billion to $3.5 billion of gross tariff costs this year, about what 2025 cost. And it has raised its full-year profit guidance twice, most recently to adjusted operating profit of $14 billion to $16 billion. About $500 million of that $1 billion improvement is tariff money GM expects back, after a Supreme Court ruling against duties collected under emergency powers.

North America, the region where the tariffs land, earned $3.4 billion in the second quarter of 2026, up 43% year over year. The tariff bill has moved around, but the business underneath it has kept getting more profitable.

The target is smaller this time

There's a second reason the doubling may sting less than it reads: GM has been shrinking its Canadian footprint since the spring of last year. Production at its CAMI plant in Ontario was suspended in May 2025, and GM confirmed last October that the BrightDrop electric van built there was finished for good. And at the end of January, the company cut the third shift of Silverado production at its Oshawa plant, placing about 500 employees on layoff. The plant still builds Silverado pickups on two shifts, though, and GM committed another 63 million Canadian dollars there in February for its next generation of gas-powered trucks.

Notably, Toyota and Honda together represented about 77% of the country's vehicle production in 2025, and each of them built more vehicles in Canada than Ford, GM, and Stellantis combined. A 50% Canadian rate hits GM, but it lands harder on the Japanese automakers' Canadian output.

The announcement still isn't good news for GM. Tariffs on about $20 billion of other Canadian goods are already in force, and an escalating trade war could reach GM through parts costs and Canadian retaliation in ways the 2025 round didn't.

Still, the record is worth weighing against the headline. GM forecast up to $5 billion, absorbed $3.1 billion, and offset more than 40% of it. Along the way, it raised its dividend 20% and authorized a $6 billion share repurchase program.

And the stock, at about $86 as of this writing, sits about 7% below its 52-week high while costing about 6 times next year's expected earnings.

A price like that already assumes the tariffs never go away. If the 2027 round plays out the way the 2025 round did, I'd expect GM's own forecast of the cost to prove too high again. Of course, a wider trade war could change that. But so far, the company has come in under every tariff number it has given investors.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool recommends General Motors and Stellantis. The Motley Fool has a disclosure policy.