Halsmer graduated from Purdue University with degrees in aeronautical engineering and aviation electronics. He was subsequently drafted into the United States Army and trained as a helicopter pilot, serving in Vietnam in 1970. His aviation background informed his analytical approach to car setup throughout his racing career.
Halsmer began competitive racing through club events before progressing to the USAC Mini-Indy Series from 1977 through 1980. His USAC Mini-Indy record was consistently competitive: he finished 12th in the standings in both 1977 and 1978, improved to fourth in 1979, and reached second overall in 1980 while running for Frank Arciero, including a race win at Ontario Motor Speedway. He also competed in the SCCA National Championship Runoffs in 1974 at Road Atlanta, driving a Brabham BT29 in Formula B.
Halsmer competed in the CART PPG IndyCar World Series over five seasons — 1980 and 1982 through 1985 — making 33 career starts. He contested the Indianapolis 500 in both 1981 and 1982. In 1981 he started from 24th position and ran until lap 135 before a crash ended his race; in 1982 he started from 32nd and retired on lap 38 with transmission failure, classified 25th.
His best result in CART came at the 1983 Grand Prix of Cleveland, where he finished second. He recorded a total of three top-five finishes across his career in the series. In 1983, his most productive CART season, he finished 11th in the championship standings with 48 points. He drove for several teams including Wysard Racing, Arciero Racing, Machinists Union Racing, and the Curb–All American Racers combination. In 1992 he represented IMSA in the International Race of Champions.
Racing under the Roush Racing banner, Halsmer won six races in the Trans-Am Series between 1986 and 1989, driving the Merkur XR4Ti. These results established Roush as a serious force in Trans-Am competition and preceded the team's move to the IMSA GTO category with Ford products.
Halsmer's most sustained success came in IMSA sports car racing. He claimed the 1989 IMSA GTO championship driving for Roush Racing in a Ford/Mercury Cougar XR-7, winning four races including the GTO class at the Daytona 24 Hours. He added a second GTO title in 1991, this time with Mazda Motorsports in a Mazda RX-7, adding three more wins to his tally.
Earlier in his IMSA career, Halsmer had already made his mark at Daytona. At the 1983 Rolex 24 he co-drove a Racing Beat Mazda RX-7 to third place overall while also winning the GTO class, one of three GTO class victories he accumulated at Daytona across his career. He also won an IMSA GTP event at Riverside in California, driving a BFGoodrich-sponsored Porsche 962.
Between 1994 and 1997 Halsmer recorded four GT2 race wins driving for BMW, and those results contributed to BMW's Manufacturer's Title in 1996.
From 1999 to 2004 Halsmer drove for and provided technical consulting to the Honda America Race Team, combining his roles as experienced driver and technical advisor. He returned to circuit competition in the Trans-Am TA2 class in 2012 and 2013. He has been nominated for induction into the Motorsports Hall of Fame of America.