Volkswagen lowered its financial guidance after earnings were hit by $1.5 billion of tariff costs during the first-half of the year.

The German automaker had held off from altering the outlook it gave at the start of the year as it awaited more clarity on the evolving trade landscape, but had cautioned that uncertainty and volatile markets risked pushing some guidance metrics toward the lower end of its forecasts.

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It said Friday that 1.3 billion euros of tariff costs, equivalent to around $1.5 billion, and €700 million of restructuring charges at Audi, Volkswagen passenger cars and software business Cariad dented operating profit in the first six months of the year, while expenses related to emissions regulation also dragged results.

President Trump slapped a 25% tariff on global automotive imports into the U.S. at the beginning of April, on top of an existing 2.5% that applied to most countries. While the U.K. and Japan have since agreed deals that see that duty drop to 10% and 15% respectively, the European Union has yet to secure an agreement.

The Wall Street Journal reported that the EU and Trump administration are negotiating an outline trade agreement that would see the bloc accept 15% tariffs on most of its exports to the U.S., including on cars.

“There is high uncertainty about further developments with regard to the tariffs, their impact and any reciprocal effects,” Volkswagen said.

Tariffs are the latest hurdle for an industry that was already contending with a stuttering electric-vehicle market, more stringent carbon-emissions regulation and long-running challenges in China, where intense competition has triggered a price war.

The company now projects sales growth this year in line with last year, with a group operating return on sales of between 4% and 5%. That compares to previous guidance for sales growth of up to 5% and an operating return on sales of 5.5% to 6.5%,

Net cash flow at its automotive division is now seen at between €1 billion and €3 billion from €2 billion to €5 billion previously, with net liquidity in the division seen at between €31 billion and €33 billion from €34 billion to €37 billion previously.

Volkswagen said the lower end of the forecast ranges assume the current U.S. import tariffs of 27.5% will continue to apply in the second half of 2025. The upper end assumes these tariffs will be reduced to 10%.

Volkswagen Chief Financial Officer Arno Antlitz said the company saw a contrasting picture in the first half, with strong product success and progress in realigning the company, but with a sharp decline in operating profit due to the tariffs and restructuring as well as higher sales of lower-margin all-electric models.

“What really matters is cash in the bank,” he said in a statement. “That’s why we must press ahead with our ongoing programs to improve earnings and pick up the pace where necessary.”

The company expects continued challenges in the remainder of the year from political uncertainty, trade restrictions and geopolitical tensions, intensifying competition, volatile markets, and more stringent emissions requirements.

The carmaker’s second-quarter operating profit fell to €3.83 billion from €5.43 billion, as revenue fell 3% to €80.81 billion.

A FactSet analyst poll had expected operating profit of €3.94 billion on revenue of €82.16 billion.

Write to Dominic Chopping at dominic.chopping@wsj.com

Corrections & Amplifications
Volkswagen’s first-half operating result was hit by 1.3 billion euros of tariff costs and 700 million euros of restructuring charges. An earlier version of this article incorrectly said they were for the second-quarter. Corrected on July 25

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