Europe's biggest carmaker reported operating profit of 2.9 billion euros ($3.3 billion) for the first three months of the year.

Europe's largest carmaker Volkswagen said Wednesday that first quarter profit plunged due to higher costs as it warned of muted business for the rest of the year in the wake of trade tensions.

Volkswagen AG’s earnings dropped by 40% in the first quarter as higher manufacturing costs cut into margins and US tariffs clouded the German carmaker’s outlook.