U.S President-elect Donald Trump warned German auto manufacturing companies he would impose a border tax of 35 per cent on vehicles imported to the U.S. market. Similar to his previous threats of a border tax to U.S. automakers that had plans to build factories in Mexico, these companies that drew Trump's ire had a sharp hit to their shares. In an interview with German newspaper Bild, published on Monday, Trump condemned German auto makers BMW, Daimler and Volkswagen for producing not enough of their vehicles on U.S. soil. "If you want to build cars in the world, 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 per cent tax," Trump had said in the newspaper, loosely translated to German. He continues "I would tell BMW that if you are building a factory in Mexico and plan to sell cars to the USA, without a 35 per cent tax, then you can forget that."
Similar to Trump's twitter remarks on GM and Ford, and their shares losing billions, BMW shares were down 2.2 per cent while Daimler and Volkswagen were both down 2 per cent. All three auto makers are heavily invested in Mexico, but they also pointed out on Monday that they do manufacturer in the United States as well. Trump had issued campaign rhetoric during the election campaign to bring jobs back to U.S. soil which had been lost to Mexico due to cheaper labor. Trump has been focusing all has power on the auto manufacturing sector which have major investments in Mexico. Trump has also issued a warning to Japan's Toyota that they could also be subjected to the "border tax." However, unlike the American auto makers, BMW executive Peter Schwarzenbauer announced publicly the company will not waiver from their plans to invest $1 billion in a new plant in Mexico which is due to go into production in 2019, employing at least 1500 people.
Trump had also complained that German automakers don't behave fairly because a lot of German cars are seen in the U.S. but few American cars in Germany. To which Germany's vice chancellor and economy minister Sigmar Gabirel responded with "the U.S. needs to build better cars." Although Trump's comments are taken seriously by the German automakers, they are standing tall in confidence that they will prevail. The companies see no benefit for the American people if there were tariffs imposed, they feel that would only make the U.S. market more expensive and weaker. Even though technically he does not have authority yet, but once inaugurated, President Trump's powers will be considerable. He can legally impose tariffs of up to 15 per cent for 150 days without being constrained by Congress.