Donald Trump, the President-elect of the U.S. has warned car makers based in Germany that he will impose a tax at the border of 35% on their vehicles that are imported to the United States, a plan that has drawn sharp rebukes from Germany and hit the shares of automakers.
During an interview with Bild, a German newspaper, Trump criticized automakers in Germany such as Daimler, Volkswagen and BMW for not producing more of their vehicles in the U.S.
Following the remarks Trump made in the interview published on Monday shares of BMW were off by 2.2%, while VW as well as Daimler shares were down 2%.
Under heavy pressure to deliver on his campaign promises to revive industrial jobs in the U.S., Trump has directed his most recent harsh remarks toward carmakers that are using low-cost plants in Mexico to serve the market in the U.S.
He also has warned Toyota based in Japan that it would be subject to his border tax if the company builds Corolla models in Mexico for the U.S. market.
All three carmakers in Germany have made big investments in Mexico, but pointed out Monday that they make vehicles as well in the U.S.
Peter Schwarzenbauer from BMW said that the company was continuing with plans to invest over $1 billion in a new factory inside Mexico, which will go into production beginning in 2019 and create over 1,500 jobs or more.
One professor of trade in Europe said that the powers Trump will have are considerable. He can impose legal tariffs of as much as 15% for 150 days and is not held back by Congress.
The professor added that even if the foreign companies object as well as look to challenge the tariffs legality, it would take another 18 months for a decision to be made.
While making investments in Mexico, carmakers from Germany have quadrupled production of light vehicles in the U.S. the last seven years to more than 850,000 units, with over 50% of them exported.
German carmakers are currently employing more than 33,000 U.S. workers and automotive suppliers from Germany another 77,000.
Sigmar Gabriel the Economy Minister of Germany said in an interview with Bild, that instead of attempting to penalize carmakers from Germany, the U.S. should respond through building more desirable and better vehicles of their own.
Officials in Germany said that Trump’s words need to be taken seriously, as it appears the president-elect is focused on short-term job and security interests.