Mercedes-Benz, Porsche and Aston Martin count steep cost of US tariffs
Good morning, and welcome to our live coverage of business, economics and financial markets.
Car companies around the world are laying out the cost of Donald Trump’s trade war, with Mercedes-Benz saying tariffs will cost it €362m (£313m) while German sportscar maker Porsche saying it would cost €400m.
British sportscar manufacturer Aston Martin Lagonda also said that it cut production and limited exports to the US to try to limit the financial impact.
The Trump administration raised tariffs of 27.5% on car imports from the EU and UK, causing chaos for German and British carmakers – although the EU trade deal will cut that to 15%, while the UK has secured a 10% tariff on the first 100,000 exports.
Mercedes-Benz said the tariffs were “causing great uncertainty”, and had hit sales, which dropped 9% year-on-year to 453,700 units in the second quarter. Reuters reported that Mercedes said tariffs would cut profits by about 1.5 percentage points, equivalent to a tariff effect of €362m on the division’s adjusted operating profit.
Ola Källenius, Mercedes-Benz’s chief executive, said:
We achieved robust financial results in the second quarter given the dynamic business environment. The best response is to stay on course to deliver desirable and intelligent products, while keeping a tight grip on costs.
Porsche said the introduction of increased US import tariffs resulted in additional costs of €400m in the first half of the year as the company protected customers from price increases.
The effect of Trump’s trade war was also evident in the UK, where Aston Martin was forced to cut back production and run down stocks at US dealers in order to avoid the tariffs of 27.5%. Those have now been reduced to 10% under the UK’s trade deal with the US – although only for the first 100,000 exports on a first-come, first-served basis.
Adrian Hallmark, Aston Martin’s chief executive, said:
The evolving and disruptive US tariff situation was unhelpful to our operations in the second quarter. In response, we adjusted production and limited imports through April and May while awaiting confirmation of a trade agreement between the UK and the US, leveraging existing inventory held by our US dealers in that period.
We resumed shipments to the US in June in anticipation of a finalised agreement which came into effect on 30 June 2025. We continue to actively engage the UK government to urge them to improve the quota mechanism to ensure fair access for the whole UK car industry to the 10% rate on an ongoing basis.
The agenda
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9am BST: Germany GDP growth rate (second quarter; previous: 0.4%; consensus: -0.1%)
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9am BST: Italy GDP growth rate (second quarter; prev.: 0.3%; consensus: 0.2%)
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10am BST: Eurozone GDP growth rate (second quarter; prev.: 0.6%; consensus: 0%)
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10am BST: Eurozone economic sentiment index (July; prev.: 94 points; consensus: 94.5)
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1:30pm BST: US GDP growth rate (second quarter annualised; prev.: -0.5%; consensus: 2.4%)
Key events
It is not just tariffs that are causing problems for Aston Martin Lagonda: the British manufacturer issued a profit warning on Wednesday blaming trade disruption, but also the slump in demand for luxury cars in China.
Adrian Hallmark, Aston Martin’s chief executive, said:
China is a big problem child – no question.
The market for luxury vehicles in China remains extremely subdued.
Chinese demand for luxury cars – and other luxury products such as watches, fine wine and clothing – has been hit by the long-running turmoil in the country’s property market, but also by a political turn away from symbols of excess in the nominally communist country.
Aston Martin had previously said it expected to generate an operating profit, but on Wednesday said that operating profits were only “expected to improve towards breakeven”.
The company said sales in China were broadly flat compared with last year, “reflecting a continued weak macroeconomic environment which is leading to supressed demand and [which] is expected to continue at least in the near-term”.
Germany’s economy shrank 0.1% in second quarter of 2025
The German economy shrank by 0.1% in the spring of 2025, as companies adjusted to the impact of Donald Trump’s tariffs.
Germany is the EU’s largest economy and biggest exporter, so its growth figures are crucial in determining the rate of growth in the eurozone – data expected at 10am BST.
Economists had expected the decline in output. The country’s federal statistics agency also revised down growth in the first quarter to 0.3%, rather than the preliminary reading of 0.4%.
You can see the tale of Germany’s struggling economy since the coronavirus pandemic in the below chart: note that GDP is below 2022 levels.
It came after France’s economy, Europe’s second-largest, significantly outperformed expectations. French GDP grew by 0.3% in the second quarter, according to preliminary data.
That was a surprise acceleration in growth from the 0.1% revised reading for first-quarter growth – and higher than the 0.1% expected by economists polled by Reuters.
Nicholas Farr, Emerging Europe economist at Capital Economics, a consultancy, also said that the economies of Hungary and Czechia “have held up reasonably well since the introduction of US tariffs in April”, according to data published on Wednesday.
Hungary’s GDP grew by 0.4% in the quarters, an improvement from a 0.1% contraction in the previous quarter. The Czech economy performed a bit worse; growth slowed from 0.8% in the first quarter to 0.2%.
The first waves have hit Hawaii after a powerful magnitude 8.8 earthquake struck off Russia’s far eastern Kamchatka peninsula and triggered tsunami warnings across the Pacific.
You can follow updates on the tsunami warnings here:
The evacuations are of course affecting businesses in the affected areas, including in Japan. Reuters reported:
Automaker Nissan Motor suspended operations at certain domestic factories in Japan to ensure employee safety, Kyodo news agency reported. Three tsunami waves had been recorded in Japan, the largest of 1.3 metres, officials said. Japan’s Chief Cabinet Secretary Yoshimasa Hayashi said there were no injuries or damage reported so far, and no irregularities at any nuclear plants.
Porsche has been heavily hit by the US tariffs, but the German sportscar maker has not yet decided to shift production to America.
The carmaker’s chief financial officer, Jochen Breckner, has told reporters this morning that the company is are observing the tariff situation and how the market responds, but there is currently no US production planned, Reuters reported.
Breckner said the EU-US trade deal is good for planning security but burdens Porsche’s business model. Porsche does most of its production in Germany.
The FTSE 100 has dropped 0.5% in the opening trades on Wednesday.
Germany’s Dax is down 0.2%, while France’s Cac 40 has dropped 0.15%. The Europe-wide Stoxx 600 is down 0.2%.
HSBC profits fell 29% in second quarter amid Chinese bank and property woes
Kalyeena Makortoff
HSBC’s profits fell by a more-than-expected 29% between April and June as its exposure to a Chinese bank and Hong Kong’s troubled commercial real estate sector took its toll.
The London-headquartered bank said it took a $2.1bn (£1.6bn) hit related to its investment in China’s fifth largest lender, Bank of Communications (BoCom), which was diluted as a result of a recapitalisation plan meant to offset the effects of a sluggish Chinese economy and struggling property sector.
The boss of the bank joined a growing chorus of bankers cautioning Rachel Reeves against increasing taxes on banks in her autumn budget, warning it risked “eroding” investment and ultimately harming UK growth.
Chief executive Georges Elhedery said that banks in the UK already subject to the highest level of taxes on profits compared to any other sector, and paid more taxes in the UK compared to most other countries. He said placing further financial pressures on lenders could spell trouble for the local economy.
Elhedery told journalists on Wednesday:
Additional taxation on banks does run the risk of eroding our continued investment capacity in in the business and in supporting our customers, and ultimately in delivering growth for the UK.
Mercedes-Benz, Porsche and Aston Martin count steep cost of US tariffs
Good morning, and welcome to our live coverage of business, economics and financial markets.
Car companies around the world are laying out the cost of Donald Trump’s trade war, with Mercedes-Benz saying tariffs will cost it €362m (£313m) while German sportscar maker Porsche saying it would cost €400m.
British sportscar manufacturer Aston Martin Lagonda also said that it cut production and limited exports to the US to try to limit the financial impact.
The Trump administration raised tariffs of 27.5% on car imports from the EU and UK, causing chaos for German and British carmakers – although the EU trade deal will cut that to 15%, while the UK has secured a 10% tariff on the first 100,000 exports.
Mercedes-Benz said the tariffs were “causing great uncertainty”, and had hit sales, which dropped 9% year-on-year to 453,700 units in the second quarter. Reuters reported that Mercedes said tariffs would cut profits by about 1.5 percentage points, equivalent to a tariff effect of €362m on the division’s adjusted operating profit.
Ola Källenius, Mercedes-Benz’s chief executive, said:
We achieved robust financial results in the second quarter given the dynamic business environment. The best response is to stay on course to deliver desirable and intelligent products, while keeping a tight grip on costs.
Porsche said the introduction of increased US import tariffs resulted in additional costs of €400m in the first half of the year as the company protected customers from price increases.
The effect of Trump’s trade war was also evident in the UK, where Aston Martin was forced to cut back production and run down stocks at US dealers in order to avoid the tariffs of 27.5%. Those have now been reduced to 10% under the UK’s trade deal with the US – although only for the first 100,000 exports on a first-come, first-served basis.
Adrian Hallmark, Aston Martin’s chief executive, said:
The evolving and disruptive US tariff situation was unhelpful to our operations in the second quarter. In response, we adjusted production and limited imports through April and May while awaiting confirmation of a trade agreement between the UK and the US, leveraging existing inventory held by our US dealers in that period.
We resumed shipments to the US in June in anticipation of a finalised agreement which came into effect on 30 June 2025. We continue to actively engage the UK government to urge them to improve the quota mechanism to ensure fair access for the whole UK car industry to the 10% rate on an ongoing basis.
The agenda
-
9am BST: Germany GDP growth rate (second quarter; previous: 0.4%; consensus: -0.1%)
-
9am BST: Italy GDP growth rate (second quarter; prev.: 0.3%; consensus: 0.2%)
-
10am BST: Eurozone GDP growth rate (second quarter; prev.: 0.6%; consensus: 0%)
-
10am BST: Eurozone economic sentiment index (July; prev.: 94 points; consensus: 94.5)
-
1:30pm BST: US GDP growth rate (second quarter annualised; prev.: -0.5%; consensus: 2.4%)