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%)
-
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%)
-
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%)
Key events
Adidas has had a knock-on effect across the trainers world: in the UK, FTSE 100 retailer JD Sports is down 2.5% today after the German shoemaker missed its sales estimates.
However, David Hughes, an analyst at Shore Capital, an investment bank, said JD Sports investors should take heart from the Adidas growth in revenues in the quarter – despite the hit from tariffs.
He wrote that lower levels of discounting and higher full-price sell-through by Adidas were “another sign of strength in the ath-leisure market”. He added:
The growth delivered in the first half gives us more confidence in the strength of the ath-leisure market and in JD’s prospects for a revenue turnaround.
Adidas warns of €200m extra production costs from Trump tariffs
Sarah Butler
Trump’s US import tariffs are expected to cost Adidas up to €200m more on production costs in the rest of this year as it warned the new tax regime could hit demand if it prompted “major inflation”.
The German footwear brand, known for its three-stripe logo, makes most of its product in China and the far east which have targeted by the new US tariff regime and has already warned that prices are likely to have to rise in the US.
On Wednesday Bjørn Gulden, the chief executive of Adidas, said the group was holding its profit forecast of between €1.7bn and €1.8bn, up from €1.3bn last year, but indicated that was under pressure. He said:
We currently feel confident to deliver it, but of course this might change – also upwards should headwinds be less than we currently assume.
The year has started great for us and normally we would now be very bullish in our outlook for the full year. We feel the volatility and uncertainty in the world does not make this prudent.
The company said that the imposition of tariffs had already cost it more than €10m in extra production costs and this figure would continue to rise.
“We still do not know what the final tariffs in the US will be” he said, adding “We do also not know what the indirect impact on consumer demand will be should all these tariffs cause major inflation.”
Gulden made the comments as Adidas revealed sales of the brand increase 12% in the second quarter of the year to €6bn. Operating profit rose 58% to €546m as the company, which is bouncing back after being forced to shut down its lucratrive Yeezy collaboration with with Kanye West in 2022, said it had reduced discounting.
Gulden said the pace of growth had risen towards the end of the period. The brand is currently outperforming its major rival Nike with both new versions of its vintage footwear styles – such as an animal print Samba that proved particularly popular with women – and its running shoes in demand.
Jillian Ambrose
Britain’s clean energy future risks creating “winners and losers” if lower-income households are not shielded from the costs added to energy bills to pay for it, the head of the energy regulator has said.
Jonathan Brearley, Ofgem’s chief executive, said a “systematic approach” to sharing the rising costs of the government’s green power ambitions was needed to avoid poorer households facing soaring monthly payments.
The regulator for Great Britain launched a root-and-branch review on Wednesday into how the costs of upgrading the energy networks can be recovered through home energy bills in a way that is fairer.
The review could include plans to cut standing charges for lower-income households while wealthier customers pay a higher cost for upgrading the energy system.
You can read the full report here:
UK housebuilder Taylor Wimpey sets aside £222m to fix cladding
The biggest faller on the FTSE 100 is Taylor Wimpey, which is down by 5% after it revealed a £222m provision to fix potentially dangerous cladding.
Eight years after the Grenfell Tower fire killed 72 people, the housebuilder said that it had found more materials within the walls of older buildings that needed to be replaced because of potential fire safety risks ahead of a UK government deadline.
In response to the Grenfell Tower fire, the government has sought to make developers pay to replace unsuitable cladding. Legislation will require landlords of buildings 18m or more in height with unsafe cladding to complete remediation by the end of 2029, and landlords of buildings 11-18m in height to complete remediation by the end of 2031.
£145m of the cost to Taylor Wimpey related to “an expanded scope of works to remediate historical building defects, relating to cavity barriers behind brickwork and render”. Those cavity barriers were not visible without “intrusive investigations” – removing the outer layer of bricks or cladding to see what was inside.
Another £40m was for cladding that had previously been judged as acceptable, plus £38m for other costs relating to the changes.
Jennie Daly, Taylor Wimpey’s chief executive, said:
The safety of our customers remains our highest priority – this principle has consistently guided our approach, and we have increased our cladding fire safety provision to reflect findings from updated fire risk assessments and investigations in the first half.
The company also warned that cladding remediation costs represent a key source of uncertainty.
The Eurozone economy has grown by 0.1% – marginally better than the expectation of zero growth from economists.
The reading was marginally better than expected in part thanks to faster-than-expected growth in France, the second-largest economy in the EU.
Still, it was a slowdown compared with the 0.6% growth in the first quarter. Some economists have put down that acceleration to companies trying to get ahead of US tariffs by making more products and racing to get exports into the country before the levies took effect.
Economists had expected a lull in demand in the spring during a payback period.
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%)