The markets acquired excellent news when it was introduced that President Donald Trump would pause reciprocal tariffs on most nations for 90 days and is opting to implement a base 10% tariff on most items. Automakers, nevertheless, did not catch a break because the pause did not lengthen to the 25% responsibility on car imports.
Worse but, the automotive trade is predicted to get slapped with an extra 25% tariff on automotive components subsequent month. The issue for Common Motors (NYSE: GM) traders is that this might power the corporate to alter one factor it is achieved very well lately: shopping for again shares.
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Share buybacks
In the case of share buybacks, Common Motors has been in overdrive, consuming up shares in recent times. Between 2023 and 2025, GM introduced $16 billion in share buybacks, and it is had a major influence on how the inventory has traded. That is an enormous quantity when you think about that the Detroit automaker has a market capitalization of $45 billion. As GM began shopping for again giant quantities of shares, you’ll be able to see the influence on the inventory worth.
The pattern continues as GM simply introduced lately it accredited a $0.03 per share enhance to the dividend, or a 25% hike, and likewise a brand new $6 billion share repurchase authorization. Additional, the automaker started an accelerated share repurchase program to execute $2 billion of the authorization within the close to time period.
Turbulent tariffs
Sadly, Common Motors is probably the worst of its home friends to get hit by Trump’s tariff plan. Whereas it was lately introduced that the reciprocal tariffs could be paused for many nations for 90 days, in favor of a base 10% tariff on most items, the automotive tariffs weren’t included in that pause.
The rationale behind GM’s looming tariff ache is that whereas the corporate produces greater than half of the autos that it sells within the U.S. domestically, solely a few third of its autos are produced utilizing American components. That may not sound like a giant deal, however take it from JPMorgan analyst Ryan Brinkman:
We estimate GM imports ~$56 billion of autos yearly from Mexico and Canada, which after adjusting for content material originating within the U.S. could quantity to ~$38 billion–subject to a ~$10 billion tariff below a 25% fee …. For components, we estimate GM’s share of the ~$92 billion imported by the trade could also be ~$4 billion, implying a complete tariff publicity of ~$14 billion earlier than coping mechanisms.
GM’s bigger reliance on imports and components created important draw back, inflicting Brinkman to decrease his GM worth goal by $11, right down to $53 per share. GM was buying and selling at roughly $44 Thursday morning.
What all of it means
The influence from tariffs should not be underestimated and will turn out to be crippling, and it places GM in a troublesome place. One choice is to pause the share buybacks to preserve money, or in a present of power it may press on with its accelerated buy program. Your guess is nearly as good as mine what GM will do, and administration has talked about the corporate is exploring a number of choices to mitigate tariffs.
For traders, nevertheless, the pause of reciprocal tariffs is an instance of how rapidly these developments can reverse course. As crippling as these tariffs could also be within the close to time period, it might be clever to not make any knee-jerk reactions, and over the long run GM will nearly actually proceed returning significant value to shareholders by way of share buybacks.
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JPMorgan Chase is an promoting associate of Motley Idiot Cash. Daniel Miller has positions in Common Motors. The Motley Idiot has positions in and recommends JPMorgan Chase. The Motley Idiot recommends Common Motors. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially replicate these of Nasdaq, Inc.
