Moody’s warned global automakers could lose $30 billion in 2025 profits

Moody’s Ratings has warned that global carmakers could take a massive $30 billion hit to their 2025 operating profits as President Donald Trump’s tariff battles slam the global auto industry.

The agency said automakers have either directly stated or quietly implied that the new tariffs will erase more than one-fifth of the operating profit these companies earned in 2024.

Margins are set to shrink by 100 to 150 basis points, and the financial damage will become clearer when automakers begin reporting third-quarter earnings later this month, according to Moody’s Ratings.

The agency’s prediction reportedly factors in Trump’s trade deals with the European Union and Japan, which offer limited stability. But negotiations with Mexico and Canada are still stalled, leaving uncertainty for the US-Mexico-Canada Agreement.

Talks with South Korea, where automakers Hyundai and KIA are headquartered, are also unresolved. The delays have left manufacturers guessing about future costs, production strategies, and export limits.

Automakers respond with cost cuts and price hikes

Automakers are scrambling to cushion the blow from the tariffs, often turning to blunt tools that hit both their products and customers.

“Automakers will continue to try to offset tariffs by reducing amenities in their vehicles and raising prices, which are less complex to implement and make more sense while the situation remains fluid,” Moody’s Ratings said. In simple terms, consumers will likely pay more for less, and car companies know it.

Several major automakers, including Volvo, Hyundai, Kia, and General Motors (GM), have already adjusted their production lines and localized more of their manufacturing to reduce exposure to tariffs. GM said it plans to invest an additional $4 billion to expand U.S. production and add new vehicle models to its domestic lineup.

But Moody’s warned that these fixes come at a cost: “Implementation of these more structural mitigation measures takes an extended period of time and likely requires additional investments by automakers and their suppliers.”

That means while these companies may dodge some tariff pain in the future, they’re paying heavily for it now. Each new investment delays returns and cuts into capital that might have gone to electric vehicles or research. And for now, the tariff squeeze remains an expensive balancing act.

Profit hits mount as trade wars grind on

The total tariff impact for major global automakers has already reached $11.7 billion, based on Yahoo Finance’s review of financial disclosures from the June quarter.

Toyota tops the list with the largest exposure, followed by Volkswagen, GM, Ford, and Honda. Chinese automakers were not included in the count since they don’t operate in the U.S., but the trade ripple still affects their parts supply chains globally.

Even Tesla, which builds all its vehicles in the U.S., has been caught in the crossfire. The company said tariff costs rose by around $300 million last quarter due to duties on imported EV components such as batteries. That impact is expected to grow as Trump’s trade measures spread through suppliers.

Moody’s said carmakers will continue adjusting their operations as they get more clarity on future tariff levels. “We expect that as automakers gradually gain clarity over future tariff levels, they will continue assessing and implementing more long-term structural measures, such as adjusting supply chains and production footprints,” the agency said.

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