GM and Ford: Navigating Steel Tariff Headwinds to Seize EV-Driven Opportunities

The U.S. steel tariff regime has entered a new phase of volatility, with rates soaring to 50% as of June 2025—marking a sharp escalation from the prior 25% imposed in March. This aggressive policy shift, framed as a national security measure, has sent shockwaves through automakers reliant on imported steel. Yet, beneath the immediate cost pressures, a compelling investment thesis emerges for General Motors (GM) and Ford (F): their resilience in managing tariffs, combined with transformative EV growth trajectories, positions them to outperform in the long term. For investors, the current turbulence presents a rare buying opportunity in fundamentally strong stocks.

The Tariff Tsunami: Near-Term Pain, but Manageable Costs

The 50% tariff on steel and aluminum imports, effective June 4, has eliminated exemptions and expanded to "derivative products," raising input costs for automakers. S&P Global Mobility estimates tariffs could add $22.4 billion annually to material costs for the sector. For GM and Ford, which source 24% of their steel needs from imports, this translates to margin pressures. However, both companies have already begun mitigating these impacts:

• Production Adjustments: GM is accelerating its shift toward U.S. suppliers, including its partnership with Nippon Steel, while Ford is renegotiating contracts to lock in domestic pricing.
• Price Pass-Through: Automakers have already raised vehicle prices by 2-3% for 2025 models, with further hikes likely. Yet, demand for EVs—where margins are higher—remains robust, shielding profitability.
• Historical Resilience: Both companies weathered 25% tariffs in 2018-2020 with minimal long-term damage. GM's adjusted EPS grew by 12% annually during that period, while Ford's stock price rebounded 40% within two years of the 2018 tariff spike.

Valuation: A Discounted Entry Point for Long-Term Gains

Both stocks trade at historically low P/E ratios, reflecting near-term uncertainties but offering rich upside as tariffs stabilize and EV sales surge.

• GM's Stronger Hand: With a trailing P/E of 5.06 (vs. Ford's 6.62) and a projected 2025 EPS of $10.62, GM's valuation is undervalued relative to its cash flow ($5.8B in Q3 2024 FCF) and disciplined capital allocation. Analysts' average price target of $60.19 (up 15% from August 2024) assumes a rebound in EV profitability by late 2024.
• Ford's Turnaround Play: Despite EV losses ($5B in 2024), Ford's dividend yield of 6% and a buyback program provide downside protection. Its EV segment (Model e) aims to achieve variable cost profitability by 2026, aligning with rising U.S. consumer demand for affordable EVs like the F-150 Lightning.

The EV Growth Engine: A Tailwind No Tariff Can Stop

While tariffs cloud the near term, the global EV market is on track to hit 20 million sales in 2025, with China alone accounting for 14 million. GM and Ford are strategically positioned to capture this growth:

• GM's Ultium Dominance: Its modular platform supports 32 EV models globally, including the Chevrolet Silverado EV, which is outselling Ford's Lightning in critical pickup markets. In China, GM's retreat has been offset by partnerships with local firms, while its focus on Southeast Asia (e.g., Indonesia) ensures access to low-cost manufacturing.
• Ford's Global Expansion: Ford's F-150 Lightning holds 25% of the U.S. pickup EV market, and its collaboration with Volkswagen's MEB platform expands its European reach. Emerging markets like Brazil and India are also primed for growth, where Ford's locally produced EVs avoid tariff pitfalls.

Risk Mitigation: Navigating Policy Volatility

The wildcard remains policy uncertainty. Retaliatory tariffs from the EU and Canada could disrupt supply chains, while U.S. political debates over EV tax credits loom. However, both companies are hedging these risks:

• Diversified Supply Chains: GM's $6 billion investment in U.S. factories and Ford's shift to Mexico (tariff-exempt until 2026) reduce reliance on Chinese imports.
• Regulatory Flexibility: GM's 30% EV sales target by 2025 aligns with EU CO2 flexibilities, while Ford's lobbying efforts aim to preserve U.S. tax incentives.

Conclusion: A Buy Signal for the Bold

The current dip in GM and Ford's stock prices—driven by tariff fears—presents a rare value opportunity. With P/E ratios at multi-year lows, robust EV pipelines, and proven cost-management strategies, both stocks are poised to rebound once tariffs stabilize.

Investment Recommendation: - GM: Buy at current levels for a $98 price target (87% upside from August 2024), supported by its disciplined capital allocation and EV leadership.- Ford: Accumulate on dips for a $19 target (70% upside), capitalizing on its high dividend yield and EV turnaround.

The steel tariff storm will pass. For investors willing to ride out the volatility, these automakers offer a rare blend of near-term resilience and long-term growth in the EV revolution. The question isn't whether to act—it's why you haven't already.