GM Averts Tariffs by Relocating Production from Mexico to the U.S.

(The News Pulse) -- General Motors Co. plans to invest $4 billion in its US plants over the next two years in response to President Donald Trump’s tariffs in a move that reduces production in Mexico while boosting domestic output of some of its some of its top-selling gas-powered vehicles.

The spending will expand factories in Michigan, Kansas and Tennessee. The moves will boost annual US production capacity by 300,000 vehicles, GM Chief Financial Officer Paul Jacobson said at a Deutsche Bank conference on Wednesday

Assembly of several top-selling models, including its very profitable Chevrolet Silverado and GMC Sierra pickup trucks and the Chevrolet Equinox SUV, will move to factories in the US from Mexico. GM plans to add between 3,000 and 4,000 US jobs when all production is in place, a spokesman said.

The shift marks one of the biggest pivots yet by an automaker in response to Trump’s tariffs that have upended the economics of automobile manufacturing. It’s also a recognition by Chief Executive Officer Mary Barra that Trump’s trade war is not a passing phase.

The investments will allow GM to produce more than 2 million vehicles in the US each year. GM will continue making vehicles affected by the announcement in Mexico, but at lower volumes, the person said.

In a separate interview with The News Pulse, Jacobson said the automaker has thus far avoided price increases due to tariffs and hopes to maintain that position.

“We don’t want to raise prices because of tariffs and then when tariffs come down expect that prices are going to come back down,” Jacobson said. “We want to be more consistent with our customer base.”

Since Trump’s first term in office, he has railed against companies for making cars in Mexico only to be imported for sale in the US. GM last year was the largest importer of finished vehicles into the US, and it’s seeking to mitigate an estimated $5 billion exposure to Trump’s tariffs.

GM has previously said that it expects to offset about a third of its tariff exposure. The latest moves will help GM reduce even more of those costs, a spokesman said.

The autmaker’s shares rose 2.3% as of 9:58 a.m. in New York. The stock had declined 8.2% through Tuesday’s close, worse than the 2.7% gain by the broader S&P 500 Index.

For GM, it’s a step away from the company’s decades-long push to increase output in Mexico, where it accelerated sourcing of parts and vehicles in the 1980s in search of lower wages and a way around growing labor and retiree costs in the US.

Barra has moved to build a good relationship with Trump after taking heat from the president for closing a former plant in Lordstown, Ohio, during his first term. She has worked with Trump on tariffs and even defended them in remarks at a Wall Street Journal event in late May, saying they could help GM protect its turf from foreign automakers.

Since Trump imposed 25% tariffs on imported vehicles and parts, Barra has had multiple meetings with the president and became convinced that levies on Mexican-made autos weren’t going away, said people familiar with the matter, who asked not to be identified because the discussions were private. GM executives began working on different plans to manage higher costs on vehicles made in those plants, one of the people said.

With the move, GM will be building pickups in five factories, with three in the US and one each in Canada and Mexico.

The automaker has long had a hard time justifying production of pickups — its most profitable vehicle line — using cheap Mexican labor. The company can make a case that the Equinox SUV makes better sense, since it starts around $28,000 and has thin profit margins.

Tuesday’s announcement hands GM’s plant in Lake Orion, Michigan, a new lease on life. The factory was slated to build the electric Silverado and Sierra pickups, which are already assembled at another plant in Detroit. The company has twice delayed those plans due to sluggish EV truck demand.

Now, the plant will build gasoline versions of those trucks starting in early 2027, in addition to large SUVs such as the Cadillac Escalade and Chevy Tahoe, joining a plant in Texas that makes them now.

GM’s Fairfax assembly plant in Kansas City, Kansas, will build the Equinox starting in mid-2027. The model is currently produced in Mexico. It will also assemble the new Chevy Bolt EV later this year and other low-cost battery-powered models that GM plans to introduce in the future.

The Tennessee plant, which makes electric Cadillac SUVs, will also get the gasoline-powered Chevy Blazer SUV in 2027.

--With assistance from Matthew Miller.

(Updates with CFO comment in the sixth paragraph)

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