Ford Motor Co. (NYSE: FN) said Wednesday that U.S. tariffs on imported cars, as well as steel and aluminum imports, will cost the company more than previously expected through 2025, sending the company's shares down about 3% in after-hours trading.
Ford Motor Company
The company confirmed that tariffs resulted in a cost of $800 million during the second quarter of this year, noting that the impact was less than that of some domestic competitors due to Ford's heavy reliance on domestic manufacturing in the United States.
In an update to its forecast, Ford raised the upper end of its estimate for total losses from tariffs this year from $2.5 billion to $3 billion, an increase of $500 million over its previous forecast.
Ford expects losses
Despite these pressures, the company issued an annual guidance expecting operating profit (EBIT) of between $6.5 and $7.5 billion, reflecting relative confidence in its ability to adapt to economic and customs challenges.
Raising customs duties
This announcement comes at a time when pressure is mounting on US auto companies due to current trade policies, with tariffs still being imposed on key industrial materials such as steel and aluminum, raising operating costs and impacting profit margins.
Tariffs and their impact on the US auto industry
Since 2018, the United States has imposed tariffs on a wide range of imports, including steel and aluminum, under the pretext of protecting national security and promoting domestic manufacturing. These measures have directly impacted the automotive sector, which relies heavily on imported raw materials for manufacturing.
Companies such as Ford, General Motors, and Stellantis faced rising production costs, prompting them to reconsider their manufacturing and import plans. Although some have attempted to increase domestic production to reduce reliance on imports, costs remain high due to continued tariffs on essential materials.
Macroeconomics and trade tensions
Amid escalating trade tensions between the United States and several major trading partners, such as China and the European Union, tariffs have become a political and economic tool with broad impact, particularly on sectors that rely on global supply chains.
In recent years, American companies have begun reevaluating their supply chains, whether by diversifying material sources or moving toward partial industrial localization, which Ford seeks to achieve by strengthening its manufacturing presence within the United States.
Ford and the Competitive Landscape
Ford has a comparative advantage over its competitors in terms of the strength of its manufacturing infrastructure within the United States, which has somewhat mitigated the effects of the tariffs. However, the $800 million increase in costs in just one quarter reflects the extent of the pressure facing the entire sector.
While Ford strives to maintain stable operating profits, challenges are mounting with ongoing trade wars, slowdowns in some foreign markets, increased logistics costs, and significant investments in electric vehicles and future technologies.
