GM Profits Jump While Sales Fall, Trump Slaps 50% Tariffs on Canada

**Zaid Admani** (0:00)
Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Tuesday, July 21st. In today's episode, we'll tell you about the latest tariff threat from President Trump, and why the market is ignoring it for now. We'll also break down GM's earnings, and how the automaker is growing profits while selling fewer cars. Then stick around to the end of the show to find out how much money FIFA made from this World Cup. We got a great show for you today.
Let's go.
Stocks kept sliding on Monday, with the S&P 500 falling 0.2%, while the NASDAQ was basically flat, technically down 0.05%. So overall, not a lot of movement in the index, but nearly two thirds of the stocks in the S&P were in the red yesterday. In fact, there's been a lot of volatility under the surface. According to BTIG, there have been 52 trading days this year, where the S&P moved in one direction, while the majority of the stocks moved in the other direction. That's not very common. In fact, this ties the year 2000 for the third most times that's happened this century. And we still have five more months left in the year. Also, if you look at the VIX, which is the market's fear gauge, it's sitting at a relatively chill 17.5. So what that indicates is that investors aren't expecting an overall market crash, but they are expecting volatility in certain stocks and sectors, and we're already seeing that. There's been a lot of rotation in and out of sectors over the last few months. And a part of this is because of all the uncertainty right now. The war in the Middle East is ramping back up, driving up oil prices and energy stocks for that matter. There's uncertainty around the AI trade and AI bubble fears. And now the market has to deal with tariffs again. Yesterday, President Trump said that he was imposing an additional 50% tariffs on roughly $20 billion of Canadian goods, including wine, cement and hockey sticks. The White House said this was in response to Canada's discriminatory treatment of American products, like the provisional bans on US wine and liquor. This new tariff will kick in in 30 days, so there is a window for negotiation, but there are also questions about whether these tariffs are even legal. Remember, earlier this year, the Supreme Court struck down many of President Trump's tariffs. Now, these new tariffs on Canada are being implemented under a 1930s trade law that has literally never been used for tariffs before, and that's why some analysts are already skeptical that these tariffs ever take effect. So yeah, we're dealing with tariff uncertainty again. Now, the market is shrugging this off for now. Stocks are in the green in pre-market trading at the time of this recording, led by a bounce back in chip stocks. We'll continue to stay on top of this new tariff development along with everything else happening in the market. So if you're new here, it's a great time to get subscribed to the podcast and tune in every day to stay in the loop. Also, we've been working very hard to get these episodes up sooner every morning. We actually finished early yesterday, but then had some very frustrating tech issues that delayed the upload. So I appreciate everyone being patient with us. We are working hard to get these up as early as possible in the morning.
Let's run through some headlines. And we're talking General Motors. GM reported second quarter earnings this morning and they beat expectations pretty much across the board, but how they did it is pretty interesting. We'll start with the numbers first. Revenues came in at $48 billion ahead of the 46.6 billion that Wall Street was expecting. Adjusted operating profit came in at $3.9 billion. That was also a beat in up from the $3 billion a year ago. On top of that, GM raised their full year profit outlook. Again, they now expect adjusted operating profit of $14 to $16 billion this year, up from the $13 to $15 billion range they gave back in January. So GM pulled off the earnings trifecta, beat on revenue, beat on profits, and increased their guidance. But here's the thing, despite the strong earnings beat, GM's actual sales are falling. US deliveries in the first half of the year dropped 6.8%, including for pickup trucks and SUVs, which is like their bread and butter. But despite the drop in sales, profits are going up, and that's happening for three main reasons. First is higher prices. GM is deliberately keeping inventory low for the most profitable vehicles, like the Chevy Silverado and Cadillac Escalade, allowing them to charge higher prices. The second reason for the improved profitability is that tariff costs have come down thanks to the Supreme Court striking down many of President Trump's tariffs earlier this year. And the third reason is more of a corporate accounting thing. GM is buying back a ton of their own stock. The company had repurchased about $2 billion worth of their stock in the second quarter, and their share count has dropped from roughly 960 million a year ago to fewer than 900 million shares today. And this is helping boost their earnings per share because a smaller share account means the company's earnings are divided across fewer shares. So that's why their earnings per share is improving despite the underlying business not growing. GM reported earnings per share of $3.57 last quarter, which was way above the $3.19 that analysts were expecting. And look, there was some additional red flags as well. EVs continued to be a drag on the company. GM recorded another $2.3 billion EV-related charge as they cut their production on EVs. These charges pushed their quarterly net income down to $1.3 billion from the $1.9 billion last year. And overall, their total EV write downs have now hit $11 billion. Big picture though, I think GM is doing the same thing that many other companies are doing now. Instead of growing their volume, they're now squeezing more profit by catering to high-end consumers. So I wouldn't be surprised if they keep raising prices on their high-end vehicles like their trucks and their escalades. But the question is, how long can GM keep doing that before they need to eventually start growing sales again? I mean, the market isn't totally convinced of their strategy right now. The stock has been down 7% this year, heading into this earnings report. And despite the beat on earnings this morning, shares are only up around 1% at the time of this recording. And if you look at valuation, the company is trading at less than six times expected for 2026 earnings, which is a pretty low multiple. And that tells me that the market isn't fully convinced on GM strategy moving forward. Let's talk about some stocks making moves today.