BMW has warned that newly imposed tariffs will cost the company approximately €1 billion ($1.09 billion) this year as global trade tensions intensify between the United States, Europe, and China.
The German automaker said on Friday that its earnings margin for its automotive segment is expected to fall between 5% and 7% in 2025, compared to 6.3% last year. The forecast includes the financial impact of European Union duties on BMW’s China-made electric vehicles, as well as a 25% U.S. tariff on steel, aluminum, and vehicles imported from Mexico.
BMW caught in crossfire of trade disputes
The trade war has placed BMW at the center of escalating economic tensions, with the automaker particularly exposed to tariffs due to its extensive global production and export operations. The company is the largest automotive exporter by value from the U.S., with its Spartanburg, South Carolina plant shipping vehicles worth more than $10 billion last year.
“In the United States, one out of every two vehicles from our plant in Spartanburg is exported,” said BMW CEO Oliver Zipse. “We benefit from an integrated global economy.”
In addition to U.S. tariffs, BMW is also grappling with European trade barriers on Chinese-made EVs. The company produces its electric Mini Cooper in China, which is now subject to a 20.7% EU import tariff.
Financial impact and market reaction
The cost of tariffs is expected to significantly dent BMW’s earnings, with company executives estimating the financial hit to be in the “mid three-digit million” euro range for duties targeting both China and Mexico. Meanwhile, tariffs on aluminum imports to the U.S. have added a “high double-digit million” euro cost.
Net profit for BMW dropped by 37% in 2024 to $8.3 billion, in line with market expectations. The company cited weaker demand in China and Germany, as well as delays in vehicle deliveries due to a recall of 1.5 million cars over potential braking issues. Fourth-quarter profit fell 41% compared to the same period in 2023.
BMW’s stock declined slightly following the announcement, with shares falling more than 2% in early Friday trading.
Outlook and industry concerns
Despite the earnings hit, BMW executives expressed optimism that some tariffs may not remain in place for the entire year. However, they warned that the trade war, if prolonged, could lead to greater disruptions.
“If you overdo it with tariffs, it sends a negative spiral to all market participants,” Zipse said. “There are no winners in that game.”
The broader automotive industry is feeling the effects of rising protectionism. The European Union has signaled it is prepared to retaliate against U.S. trade measures, while analysts warn that prolonged uncertainty could lead to reduced investment and slower economic growth.
U.S. President Donald Trump has also threatened additional tariffs on European auto imports, which could further complicate BMW’s financial outlook. The company stated that its current guidance does not account for any potential future tariffs beyond those already imposed.