Trump threatens German carmakers with 35 pct US import tariff

FRANKFURT - Reuters

AFP photo

Shares in German carmakers BMW, Daimler and Volkswagen fell after United States President-elect Donald Trump warned he will impose a border tax of 35 percent on vehicles imported from abroad to the U.S. market.

All three carmakers have invested heavily in factories in Mexico, where production costs are lower than the United States, with an eye to exporting smaller vehicles to the U.S. market.

In an interview with German newspaper Bild, published on Jan. 16, Trump sharply criticized the German carmakers for failing to produce more cars on U.S. soil.

“If you want to build cars in the world, then I wish you all the best. You can build cars for the United States, but for every car that comes to the USA, you will pay 35 percent tax,” Trump said in remarks that were translated into German.

“I would tell BMW that if you are building a factory in Mexico and plan to sell cars to the USA, without a 35 percent tax, then you can forget that,” Trump said, adding that carmakers will instead have to build plants in the United States.

Mercedes-Benz and BMW already have sizeable factories in the United States where they build higher-margin sports utility vehicles (SUVs).

BMW shares were down 0.85 percent, shares in Daimler were 1.54 percent lower and Volkswagen shares were trading 1.07 percent lower shortly in early trading in Frankfurt.

A BMW spokeswoman said a BMW Group plant in the central Mexican city of San Luis Potosi would build the BMW 3 Series starting from 2019, with the output intended for the world market. The plant in Mexico would be an addition to existing 3 Series production facilities in Germany and China.

In June last year, BMW broke ground on the plant, pledging to invest $2.2 billion in Mexico by 2019 for annual production of 150,000 cars.

Daimler has said it plans to begin assembling Mercedes-Benz vehicles in 2018 from a $1 billion facility shared with Renault-Nissan in Aguascalientes in Mexico. Daimler was not immediately available for comment.

Last year VW’s Audi division inaugurated a $1.3 billion production facility with 150,000 vehicle production capacity near Puebla, Mexico. Audi said it will build electric and petrol Q5 SUVs in Mexico.

Audi was not immediately reachable for comment.

Trump went on to say Germany was a great car producer, noting that Mercedes-Benz cars were a frequent sight in New York, but claimed there was not enough reciprocity.

Germans were not buying Chevrolets at the same rate, he said, calling the business relationship an unfair one-way street.

Chevrolet sales have fallen sharply in Europe since parent company General Motors in 2013 said it will drop the Chevrolet brand in Europe by the end of 2015. Since then, GM has focused instead on promoting its Opel and Vauxhall marques.