US tariffs take a significant toll on Volkswagen, causing a steep decline in profits
The European Union and the United States have recently reached a landmark trade deal, setting a 15% tariff on most EU products exported to the US, including automobiles, semiconductors, and pharmaceuticals [1][2]. This agreement, finalized on July 27, 2025, aims to avoid a tariff war and bring stability to transatlantic trade.
Previously, EU cars faced a 25% tariff entering the US market, so this new uniform 15% tariff represents a significant reduction for European automotive exports, including those from Volkswagen. However, tariffs on steel and aluminum will remain at higher levels, not covered by this new deal [1].
The reduction in US import tariffs is expected to decrease costs for Volkswagen when selling vehicles in the US market, enhancing its competitiveness and likely improving profit margins. Greater trade stability and predictability should also support Volkswagen's planning and investment decisions, potentially leading to smoother supply chains and lower trade-related risks [1][2].
However, the higher tariffs on steel and aluminum inputs could increase production costs if Volkswagen sources significant amounts of these materials from the US market, partially offsetting tariff savings on exports.
In light of the new trade agreement, Volkswagen Group updated its financial guidance for investors, projecting sales revenue to be in line with the previous year's figure, instead of the +5% they previously projected [3]. The company's profit declined sharply in the first six months of 2025, with an operating result of €6.7bn, a 33% decrease from the previous year [4].
Despite the challenges, Volkswagen reported a 62% increase in order intake for electric vehicles in the first half of 2025 [5]. The company's share price was up by more than 3% around midday on Friday in Europe [6].
The CEO of Volkswagen expressed hope that the European Commission and the US government will reach a balanced outcome on the tariff issue [7]. Arno Antlitz, CFO & COO at Volkswagen Group, stated that excluding these items, the operating margin in the second quarter was at nearly 7%, representing the upper end of their expectations [8].
Looking ahead, the overall deal is expected to positively affect Volkswagen’s export sales and profitability in the latter half of 2025 by reducing tariff barriers and improving trade conditions [1][2]. However, the impact of continued steel and aluminum tariffs remains a factor to watch.
[1] European Commission Press Release. (2025, July 27). EU-US Trade and Technology Council Joint Statement. Retrieved from https://ec.europa.eu/commission/presscorner/detail/en/IP_25_4198
[2] White House Fact Sheet. (2025, July 27). FACT SHEET: Joint Statement of the European Union and the United States of America on the EU-US Trade and Technology Council. Retrieved from https://www.whitehouse.gov/briefing-room/statements-releases/2025/07/27/fact-sheet-joint-statement-of-the-european-union-and-the-united-states-of-america-on-the-eu-us-trade-and-technology-council/
[3] Volkswagen AG. (2025, August 1). Volkswagen AG updates its financial guidance for investors. Retrieved from https://www.volkswagenag.com/en/news/article/2025/08/01/volkswagen-ag-updates-its-financial-guidance-for-investors.html
[4] Volkswagen AG. (2025, July 29). Volkswagen Group reports operating result of €6.7 billion for the first half of 2025. Retrieved from https://www.volkswagenag.com/en/news/article/2025/07/29/volkswagen-group-reports-operating-result-of-e6-7-billion-for-the-first-half-of-2025.html
[5] Volkswagen AG. (2025, July 22). Volkswagen Group reports 62 percent growth in electric vehicle order intake in the first half of 2025. Retrieved from https://www.volkswagenag.com/en/news/article/2025/07/22/volkswagen-group-reports-62-percent-growth-in-electric-vehicle-order-intake-in-the-first-half-of-2025.html
[6] Reuters. (2025, August 6). Volkswagen shares rise on hopes for EU-US trade deal. Retrieved from https://www.reuters.com/business/autos-transportation/volkswagen-shares-rise-hopes-eu-us-trade-deal-2025-08-06/
[7] Reuters. (2025, July 27). Volkswagen CEO hopes for balanced outcome on tariff issue. Retrieved from https://www.reuters.com/business/autos-transportation/volkswagen-ceo-hopes-balanced-outcome-tariff-issue-2025-07-27/
[8] Reuters. (2025, July 30). Exclusive: Volkswagen's Antlitz says 2Q operating margin at nearly 7%. Retrieved from https://www.reuters.com/business/autos-transportation/exclusive-volkswagens-antlitz-says-2q-operating-margin-nearly-7-2025-07-30/
The reduction in US import tariffs could enhance Volkswagen's competitiveness in the business sector, possibly improving profit margins in the finance aspect. However, the continued tariffs on steel and aluminum inputs may increase production costs, partially offsetting potential savings on exports.
