Mercedes-Benz reported a sharp drop in profitability for its core car division in the first quarter of 2025, citing escalating trade tensions and unpredictable tariff policies as key factors behind its decision to pull its full-year guidance.

The German automaker's car segment posted a profit margin of 7.3%, down from 9% a year earlier. Group earnings before interest and taxes (EBIT) tumbled 41% year-over-year to €2.3 billion ($2.62 billion) in the January–March period.

In a statement, the company cited the high level of uncertainty caused by shifting tariff measures and the potential ripple effects on consumer behavior and demand. “The current volatility around trade policies and mitigation efforts makes it too difficult to reliably forecast business performance for the remainder of the year,” Mercedes said.

The tariff-heavy stance of U.S. President Donald Trump has added to the mounting pressure on European automakers, already grappling with rising operational costs and fierce competition from Chinese brands.

Looking ahead, Mercedes warned that if existing trade dynamics remain in place, profit margins in both its passenger car and van divisions are likely to face continued downward pressure.