That’s the dirty little secret of tariffs: Someone always pays, and it’s not who the protectionists say it is.

The protectionist message is simple: Impose tariffs to protect American manufacturers, make the U.S. auto industry more competitive, and re-shore production. It is a message that truly appeals to many.

But the reality is never that simple, as recently revealed by cold, hard earnings reports. These tariffs are hurting the very companies they were supposed to help. General Motors, the largest U.S. automaker by sales, just offered some evidence to that effect.

In its Q2 2025 report, GM revealed that tariffs on imported cars and parts reduced its operating income by $1.1 billion. That’s a 35 percent decline in net income compared to the same period in 2024. Q3 won’t be any better. That’s not chump change.

GM decided not to raise prices yet, as it has chosen to absorb the blow — for now. That could be because executives know that passing the cost of the tariffs along to American consumers would anger both customers and a president who has made loyalty to his economic agenda a litmus test for corporate patriotism. But this corporate self-restraint has limits. As CFO Paul Jacobson hinted, GM may have “a longer term plan to mitigate a substantial part of this,” but unless trade policy “normalizes,” price hikes are inevitable.

And that’s the dirty little secret of tariffs: Someone always pays, and it’s not who the protectionists say it is. First, it’s often the company (which is a consumer of inputs that are now subject to tariffs and, as a result, ends up cutting its profits). Then it’s the final customer. And finally, it’s the broader economy — including most workers.

GM imports roughly half of the vehicles it sells in the U.S., including affordable models like the Chevy Trax and Buicks, which are made in South Korea. These vehicles, many priced under $30,000, are now more expensive to make, even after Trump’s partial exemptions for Canada and Mexico. Stellantis reported a $350 million tariff hit.

GM’s plan to increase U.S. production by 300,000 units by 2027 might sound like a win for re-shoring, but it’s a drop in the bucket compared to the billions in costs that tariffs are imposing. And even that shift comes with trade-offs: less efficiency, higher production and consumer costs, and production delays that ripple through the supply chain.

These tariffs were supposed to protect American jobs and strengthen domestic manufacturing. Instead, they’re shrinking margins, reducing profits — and hence investment — and setting the stage for higher consumer prices.

If the goal is to strengthen American manufacturing, this probably isn’t the way. Douglas Holtz-Eakin reminds us how tariffs have repeatedly failed to save the steel industry.

He points also to the NYT update on the impact of the steel industry on prices. It shows what we already knew: Tariffs raise both foreign and domestic prices. From the Times:

[A]s imports have declined, American producers have more power to opportunistically increase their price. . . . [D]ata shows that domestic steel producers have raised prices 16% this year

We now hold the record for having the most expensive steel in the world. In what universe is that a good thing?

I hope that the administration succeeds in its energy abundance and dominance in AI. We will need it to offset (or more than offset) this part of the agenda.