Mercedes-Benz has lowered its 2025 profit margin forecast for its car division to 4–6%, citing a nearly $420 million hit from tariffs and broader trade tensions sparked by US President Donald Trump’s trade war.
The German luxury carmaker had earlier projected a margin of 6–8% for the year, but that estimate given in February did not account for the tariff burden. By April, the company had withdrawn the guidance entirely.
Now, in its first concrete estimate since the US-EU trade deal was struck, Mercedes says tariffs will shave roughly 150 basis points off its margin, amounting to €362 million ($418 million) in losses for its car division’s operating profit.
The US and EU reached a framework agreement over the weekend, narrowly avoiding a full-blown trade conflict. The US agreed to impose a 15% import tariff, half of the originally threatened 30% on most EU goods, while the EU committed to reducing non-tariff barriers on American cars and other products.
While the outcome was more favorable than feared, Mercedes acknowledged that even the scaled-down tariffs would still hurt its bottom line. “Excluding tariffs, the margin would still fall on the lower end of our original guidance,” a company spokesperson said.
The damage is already evident. Mercedes-Benz’s second-quarter adjusted EBIT fell more than 50% to €1.99 billion ($2.30 billion). Including tariffs, internal efficiency challenges, and a €750 million loss tied to a plant sale and restructuring in Argentina, reported EBIT dropped further to €1.27 billion.
Revenue also fell by 9% to €33.15 billion, driven by declining vehicle sales and trade costs.
China, once Mercedes’ growth engine, is now part of the problem. Vehicle sales in the world’s largest auto market dropped 10% in Q1 and 19% in Q2, hurt by rising local competition, premium pricing, and a slower adaptation to electric vehicles.
Germany’s Chancellor Friedrich Merz welcomed the US-EU trade deal, saying it helped protect Germany’s export-heavy economy from deeper harm. Mercedes, with a significant share of its US exports coming directly from Europe, stands to benefit more than peers with heavier North American production.
The carmaker also operates a major US plant in Tuscaloosa, Alabama, but it hasn’t been enough to offset the global decline.
Looking ahead, Mercedes expects 2025 group revenues to fall significantly below 2024 levels, with both its car and van divisions under pressure.
Erizia Rubyjeana
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