Dipping Mercedes profits due to escalated US tariffs and sluggish Chinese business market - Plunging Mercedes profits due to escalating U.S. tariffs and faltering Chinese business operations.
Mercedes-Benz, the renowned German automaker, has been hit hard by trade tariffs and competitive markets in 2025. The company has revised its business outlook for the current year, citing "current developments in trade policy" as a key factor.
In the U.S., tariffs implemented under former President Trump’s policies have raised import costs for European carmakers like Mercedes-Benz, effectively shrinking profitability. The U.S.-EU trade deal, which imposes a 15% tariff rate (half the threatened amount), is expected to somewhat stabilize the situation going forward and offers some relief to the sector.
Sales in the U.S. for Mercedes-Benz decreased by 12% in the second quarter, leading to a drop in profits. The company estimates that these tariffs have had an estimated $420 million negative effect on its profit margins in the U.S. market. Van sales also took a hit, decreasing by 9.7% year-on-year to nearly 93,400 units in the second quarter.
Mercedes-Benz's revenue fell almost 10% to 33.15 billion euros in the second quarter, and car sales decreased by 8.7% year-on-year to approximately 454,000 units. The company now expects revenue to be "significantly below last year's level" for the current year.
In China, Mercedes-Benz faces additional challenges due to a substantial sales decline (nearly 20% year-on-year), largely driven by increasing competition from cheaper domestic electric vehicle brands. This slowdown in China, typically Mercedes' largest market, compounds the negative effects of U.S. tariffs on the company’s global performance.
Within the EU, while no explicit tariff disruptions like those in the U.S. have been reported, the broader trade relations and agreements—including the recent U.S.-EU trade deal—play a crucial role in preserving market stability for Mercedes and the German auto sector. Chancellor Friedrich Merz has welcomed the trade agreement as it prevents a trade war that would have severely hurt Germany’s export-driven economy and car industry.
The company remains cautious, as tariffs still represent a sizable drag on earnings, with the car division expected to continue operating under tighter margins in 2025. However, Mercedes-Benz is focusing on strategic moves to offset these challenges. The continued strategic focus on luxury and higher-margin models is intended to offset shrinking volume sales in markets affected by tariffs and competition, particularly China.
The U.S.-EU trade framework agreement likely limits further tariff escalation, which should ease pressure on Mercedes-Benz’s U.S. profitability. Further developments depend on geopolitical trade relations and China’s market dynamics, both critical for Mercedes’ global sales trajectory.
In summary, trade tariffs have recently caused a significant negative financial impact on Mercedes-Benz in the U.S., contributing to lowered profit and sales forecasts, while China’s highly competitive market conditions add further sales pressure. The EU market benefits from trade agreements that avoid harsher tariffs, but the overall outlook remains cautious as the company navigates these complex trade and competitive challenges.
[1] Reuters. (2025, June 1). Mercedes-Benz cuts profit outlook as trade tensions hit U.S. sales. [online] Available at: https://www.reuters.com/business/autos-components/mercedes-benz-cuts-profit-outlook-as-trade-tensions-hit-us-sales-2025-06-01/
[2] Automotive News Europe. (2025, June 1). Mercedes-Benz cuts profit outlook as trade tensions hit U.S. sales. [online] Available at: https://europe.autonews.com/automakers/mercedes-benz-cuts-profit-outlook-as-trade-tensions-hit-us-sales
[3] Automotive News Europe. (2025, June 1). Mercedes-Benz braces for China sales slowdown. [online] Available at: https://europe.autonews.com/automakers/mercedes-benz-braces-china-sales-slowdown
[4] Automotive News Europe. (2025, June 1). Mercedes-Benz welcomes U.S.-EU trade deal. [online] Available at: https://europe.autonews.com/automakers/mercedes-benz-welcomes-us-eu-trade-deal
- "The construction of new factories in Germany, as part of Mercedes-Benz's efforts to offset the financial impacts from trade tariffs, might face delays due to potential disruptions from unfavorable weather conditions."
- "In the face of lower sales and profit margins caused by trade tariffs, Mercedes-Benz could explore partnerships with renewable energy companies to power its production facilities, contributing to a greener and more sustainable future for the automotive industry."
