Mercedes-Benz has lowered its 2025 profit margin forecast for its car division to between 4% and 6%, down from an earlier projection of 6% to 8%, as trade tensions and new tariffs—sparked by U.S. President Donald Trump’s trade policies—deal a nearly $420 million blow to the luxury carmaker.
The German automaker, which had withdrawn its initial margin guidance in April, issued the revised estimate following the recent U.S.-EU trade deal. The company now says tariffs will reduce its car division’s operating margin by 150 basis points, translating to losses of around €362 million ($418 million).
The U.S. and EU struck a framework agreement over the weekend, narrowly avoiding a broader trade conflict. Under the deal, the U.S. imposed a 15% tariff—half of the initially proposed 30%—on most EU imports, while the EU agreed to ease non-tariff barriers on American cars and other goods.
Although the deal softened the impact, Mercedes-Benz acknowledged that even the reduced tariffs would significantly affect earnings. “Excluding tariffs, the margin would still fall on the lower end of our original guidance,” a company spokesperson said.
The financial damage is already evident. In the second quarter, Mercedes’ adjusted earnings before interest and tax (EBIT) dropped by more than 50% to €1.99 billion ($2.30 billion). Factoring in tariffs, internal efficiency setbacks, and a €750 million loss linked to a plant sale and restructuring in Argentina, reported EBIT fell further to €1.27 billion.
Revenue also declined by 9% to €33.15 billion, largely due to reduced vehicle sales and higher trade-related costs. China—once a key growth driver for Mercedes—has become a challenge, with vehicle sales dropping 10% in Q1 and 19% in Q2, amid intensified local competition, premium pricing concerns, and slower adoption of electric vehicles.
Germany’s Chancellor Friedrich Merz welcomed the U.S.-EU trade agreement, saying it helps shield Germany’s export-reliant economy from more severe disruption. Mercedes, which exports a large share of its U.S.-bound vehicles directly from Europe, is expected to benefit more than rivals with heavier North American production.
While Mercedes operates a major manufacturing facility in Tuscaloosa, Alabama, it has not been sufficient to offset the global downturn.
Looking ahead, the company expects 2025 group revenues to decline significantly compared to 2024, with both its car and van segments likely to face continued pressure.
