German automaker BMW on Wednesday reported a sharp decline in first-quarter profit, citing the impact of U.S. auto tariffs, and warned that trade-related pressures would continue to weigh on earnings throughout the year.

Net profit fell 23.1 percent year-on-year to 1.67 billion euros (1.97 billion U.S. dollars) in the first quarter, down from 2.17 billion euros (2.55 billion dollars) a year earlier.

BMW's automotive segment recorded an earnings before interest and taxes (EBIT) margin of 5 percent, compared with 6.9 percent in the same period last year. The company said tariffs alone reduced the margin by 1.25 percentage points, describing the impact as "significantly stronger" than a year earlier.

BMW warned that the business environment could worsen further this year amid continued tariff volatility and geopolitical uncertainty, including tensions in the Middle East.

The warning comes as uncertainty persists over transatlantic trade relations. Washington lowered tariffs on European car imports to 15 percent in the second half of last year, but U.S. President Donald Trump last week threatened to raise them again to 25 percent, accusing the European Union of failing to comply with a trade agreement.

The proposed tariff increase could hit German automakers particularly hard, as the United States remains a major export market for the industry.

According to the German Association of the Automotive Industry (VDA), Germany exported about 3.17 million vehicles in 2025, including nearly 410,000 shipped to the United States. Exports to the U.S. market fell 9 percent year-on-year as tariffs weakened demand.