Volkswagen has revised its full-year sales and profit forecasts downward after reporting a €1.3 billion ($1.5 billion) tariff-related loss in the first half of 2025 — the clearest sign yet of the toll U.S. trade tensions are taking on Europe's largest carmaker.
The company now projects an operating profit margin of 4% to 5%, down from its earlier forecast of 5.5% to 6.5%. Likewise, it expects 2025 sales to remain flat, reversing previous guidance that anticipated up to 5% growth.
The impact of U.S. tariffs — imposed in April under the trade policy of President Donald Trump — was outlined in the carmaker’s quarterly report released Thursday. The 25% punitive levy has affected not only Volkswagen but also other European manufacturers struggling with a combination of trade friction, Chinese competition, and strict EU climate regulations pushing the shift to electric vehicles (EVs).
Volkswagen's Q2 operating profit came in at €3.8 billion, marking a sharp 29% year-on-year decline, driven by tariffs, restructuring costs, and a sales shift toward lower-margin EVs.
The news sent Volkswagen shares down 3.5% in Frankfurt pre-market trading. The company warned that unless tariffs are rolled back, results would likely fall at the lower end of its new guidance. However, if a reduced tariff rate of 10% is secured, results could land at the upper end of the revised forecasts.
“There is high uncertainty about further developments with regard to the tariffs, their impact and any reciprocal effects,” the company said in a statement.
Industry Push for Trade Relief
In response to mounting losses, Volkswagen and other European carmakers are urging EU trade negotiators to broker a deal with the U.S. — mirroring a pact recently signed between Washington and Tokyo. One proposal is to leverage European manufacturers' investments and exports in the U.S. to ease the burden.
Meanwhile, EU diplomats are exploring a 15% bloc-wide tariff as a potential compromise, aimed at averting a further escalation to 30% tariffs threatened by the U.S. from August 1.
Broader Industry Pain
Volkswagen’s results echo broader turmoil in Europe’s auto sector, where June sales data confirm slowing momentum. While EV adoption is increasing, it’s bringing margin pressure, and traditional automakers like Volkswagen are under strain from aggressive pricing by Chinese EV firms and the high costs of climate compliance.
Volkswagen is currently undergoing a sweeping restructuring plan that includes cutting over 35,000 jobs by 2030, part of its bid to become leaner and more competitive in a shifting global market.
Bottom line: Volkswagen's tariff-fueled losses and reduced forecasts underscore the vulnerability of Europe’s auto industry to geopolitical shocks and regulatory headwinds. With high-stakes trade negotiations underway, the company — and the broader sector — faces an uncertain second half of 2025.