Tariffs continue to impact the automotive industry, with Ford (F.US) joining the warning list: this year's profits may plummet by 36%.

Ford Motor Company (F.US) warned that its profits will significantly decrease this year due to the escalating impact of the tariff policies implemented by President Trump. This highlights the major policy changes happening in Washington that are disrupting the global automotive industry. The American automaker expects its adjusted EBIT to fall by as much as 36% this year. This is mainly due to a net tariff impact of $2 billion, which is about $500 million more than the company's previous expectations. This is the latest example showing how automakers are being repeatedly affected by Trump's policies. The tariffs imposed by the U.S. on imported cars, car parts, steel, aluminum, and goods from major trading partners have significantly increased costs for Ford and its competitors. Despite producing more cars in the U.S. than any other automaker, the company still faces high and growing tariff costs. However, at the same time, the Trump administration's relaxation of strict emissions standards may be a significant positive for Ford and its Detroit competitors, allowing them to sell profitable high fuel-consuming SUVs and pickups. Ford CEO Jim Farley stated that these policy adjustments signal a long-term transformation in the global automotive industry. Farley said on Wednesday's Ford earnings call, "We are increasingly finding that Europe, North America, and Asia are gradually becoming their own regional markets. I believe this is a quite significant change." Farley mentioned that the trade agreement reached between the Trump administration and Japan, lowering tariffs from 25% to 15%, gives competitors like Toyota Motor Corp. Sponsored ADR (TM.US) a huge cost advantage in competing with Ford, especially considering Japan's lower labor and currency costs. He said that Ford's Escape SUV, produced in Kentucky, has about a $5,000 cost disadvantage compared to Toyota's Rav4, while there is up to a $10,000 cost difference between the Japan-made 4Runner SUV and Ford's Bronco produced in Michigan. Farley stated, "This is indeed a significant difference, and the company is working with the Trump administration to minimize our tariff expenses and improve our competitiveness." He told analysts on a conference call that Trump's tariff policy "feels more like a long-term measure." Tariff Impact Ford CFO Sherry House told reporters that Ford is currently expecting a larger scale tariff impact, partly due to Trump's decision to increase tariffs on steel and aluminum from 25% to 50%. These tariffs affect Ford as they increase costs for its material suppliers, who then pass on these costs to the automakers. Another factor driving up costs is the tariffs implemented to curb the flow of fentanyl into the U.S. Ford stated that these tariffs have lasted longer at a higher level than expected. House said, "The government is aware of these multiple tariff situations and is working with us to address this issue." Ford's tariff data is just one of many examples showing the adverse effects of the fluctuating U.S. trade policies on the automotive industry. General Motors Company (GM.US) stated last week that tariffs reduced its second-quarter profits by $1 billion and the company expects to incur losses of $4 to $5 billion for the year. Jeep manufacturer Stellantis (STLA.US) said on Tuesday that import taxes will reduce its profits by about $1.7 billion this year. Since most automakers have not significantly raised prices to offset the increased costs from tariffs, profits have been impacted. House told reporters that the company expects vehicle prices to remain stable for the rest of the year. Ford's profit warning largely overshadowed the positive news that its second-quarter earnings exceeded Wall Street's expectations. The quarter's earnings per share were 37 cents, higher than the analysts' average expectation of 33 cents. The adjusted EBIT was $2.1 billion, also surpassing the expected $1.91 billion. Ford Motor Company also expects full-year adjusted EBIT of $6.5 to $7.5 billion, estimated at $6.84 billion; anticipates full-year adjusted free cash flow of $3.5 to $4.5 billion; anticipates full-year capital expenditures of around $9 billion, estimated at $8.15 billion. Profit Decline, Setback in Electric Vehicle Business Ford Blue is the automaker's traditional business segment, covering internal combustion engine vehicles and hybrids. In the second quarter, this segment's EBIT was $661 million, about half of the $1.2 billion in the same period last year. In this quarter, Ford's car sales in the U.S. soared by 14.2%, and the company also launched a promotion offering employee pricing to everyone. The Ford Professional Services division, which has been performing well, reported an EBIT of $2.3 billion, lower than the $2.6 billion in the second quarter of last year. Ford's electric vehicle division "Model-e" incurred a loss of about $1.3 billion in the quarter, exceeding the approximately $1.2 billion loss in battery-driven models from the same period last year. Ford's electric car sales in the U.S. declined by 31% in the quarter due to aging models and a temporary suspension of sales of the electric version of the "Mustang Mach-e" due to a safety recall. Ford predicts losses in its electric vehicle sector could reach $5.5 billion this year. Farley stated during Wednesday's conference call that the company will announce an updated electric vehicle strategy at an event in Kentucky on August 11, including plans for a "breakthrough electric vehicle." He said, "For us at Ford, this is the moment when the 'Ford Model T' era arrives." He also sees enormous opportunities for Ford in the Siasun Robot&Automation taxi business, where the company can participate as service providers for autonomous vehicles. Talking about the expanding autonomous taxi network, Farley said, "We do believe that fleet management is a huge opportunity for the Ford Professional Services division." Farley is also working to control the increasing number of recall events, which have reached historic highs. Ford is busy improving product quality and trying to shake off the image of being the automaker with the most recalls in the U.S. The company set aside $570 million in the second quarter to pay for the recall of nearly 700,000 sport utility vehicles with potential engine fire defects.