Trump threatens German carmakers with 35% import duty

President-elect Donald Trump speaks with reporters in the lobby of Trump Tower in New York. AP Photo/Evan Vucci

President-elect Donald Trump speaks with reporters in the lobby of Trump Tower in New York. AP Photo/Evan Vucci

Published Jan 16, 2017

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Berlin - United States

President-elect Donald Trump warned German car companies he

would impose a border tax of 35 percent on vehicles imported to

the US market, a plan that drew sharp rebukes from Berlin and

hit automakers' shares .

In an interview with German newspaper Bild, published on

Monday, Trump criticised the German carmakers for failing to

produce more cars on US 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 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.

Volkswagen shares fell 2 percent, and shares in

Daimler and BMW both fell 1.8 percent by

1033 GMT.

Trump has turned his fire on automakers who manufacture cars

in Mexico, a growing production centre where costs are lower. He

has warned Japan's Toyota it could be subject to a "big

border tax" if it builds its Corolla cars for the US market at

a planned factory in Mexico.

All three German carmakers have invested heavily in

factories in Mexico, with an eye to exporting smaller vehicles

to the U.S. market.

At the same time, German carmakers have quadrupled light

vehicle production in the United States over the past seven

years to 850,000 units, more than half of which are exported

from there, the German VDA automotive industry association said.

Read also:  Toyota stocks tumble after Trump criticism

"In the long term, the United States would be shooting

itself in the foot by imposing tariffs or other trade barriers,"

VDA President Matthias Wissmann said in a statement.

Serious warning

Speaking in tabloid newspaper Bild, German Economy Minister

Sigmar Gabriel said that rather than trying to penalise German

carmakers, the US should instead respond by building better

and more desirable cars.

Norbert Roettgen, head of Germany's foreign affairs

committee, said Berlin needed to take Trump's comments on the

possible border tax seriously.

"He seems to be absolutely focused on short-term job

interests and security interests ... not that he is looking for

free trade so much, but more for protection," Roettgen told

Reuters.

Mercedes-Benz and BMW already have sizeable factories in the

United States where they build higher-margin sports utility

vehicles (SUVs) for export to Asia and Europe.

Around 65 percent of BMW's production from its factory in

Spartanburg, South Carolina is exported overseas. BMW builds the

X3, X4, X5 and X6 models in the United States.

"It is surprising that Trump singles out the carmaker that

exports more vehicles from the United States than any other

manufacturer," analysts at Evercore ISI said.

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.

Read also:  Trump policies create financial-crisis risks

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. A

spokesman for Daimler declined to comment on Trump's remarks.

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 declined comment on Monday.

Volkwsagen also declined to comment on Trump's remarks but

pointed out it was investing another $900 million in its U.S.

plant in Chattanooga, Tennessee.

Trump called Germany 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 would drop the

Chevrolet brand in Europe by the end of 2015. Since then, GM has

focused instead on promoting its Opel and Vauxhall marques.

REUTERS

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