Trump comments hit shares in German vehicle makers

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17 January, 2017

In an interview with German newspaper Bild, Trump said his administration will impose a border tax of 35 per cent if BMW goes through its plans to build a new plant in Mexico which will also export to the US. "The American auto industry is getting worse, weaker and more expensive", he countered.

Mr Gabriel also added that the high border tariff will hurt America's economy if imposed.

He also suggested the United States should instead focus on building better, more sought after cars.

German Vice Chancellor Sigmar Gabriel was also interviewed Monday by Bild.

BMW intends to have a plant in the central Mexican city San Luis Potosi build their 3 series cars from 2019 onwards, cars that are intended for the world market, a spokeswoman told Reuters. "I would tell BMW that if you are building a factory in Mexico and plan to sell cars to the U.S., without a 35 per cent tax, then you can forget that", he added.

Indeed, if American automakers want to improve their worldwide sales, the Vice Chancellor suggested, they should "build better cars" rather than expect the incoming administration to tip things in their favor. After taking shots at Detroit's Big Three, Trump turned his fury to the Germans on Monday, calling out the country's vehicle industry. Due to cheap labor and Mexico's various free trade agreements, it remains a popular manufacturing location. "WIN!" Trump tweets were quoted by Bild and Automotive News.

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Trump has been a frequent critic of the US automotive industry, targeting Ford, General Motors and Toyota (TM) for building vehicles in Mexico and shipping them into the USA tax-free. Ford's CEO Mark Fields called this move as a step towards building positive USA business environment, a vote of confidence in the Trump era. Trump has, time and again, called out a number of manufacturers with existing and upcoming operations outside of the country.

Mexico's auto industry has grown on the back of the North American Free Trade Agreement, which gives it access to the United States and Canadian markets. The annual export value is almost $10 billion, greater than any other auto company in the U.S. according to the U.S. Department of Commerce.

When asked about the lack of American cars in Germany, Gabriel was even more blunt.

'I would wait and see what the Congress has to say about that, which is mostly full of people who want the opposite of Trump'.

The German Association of the Automotive Industry reiterated those figures Monday after Trump's comments were published. If Mr. Trump's anticipated trade barriers are introduced, it will cause a real damper on the economy of both nations.


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