German Auto Shares Sink in Wake of Trump Remarks

German car

After president elect Donald Trump threatened the country would set a 35% import tariff on German cars if they were made in Mexico the stock prices of several auto makers including BMV, VW and Mercedes-Benz-owned Daimler fell by up to 2%.

Following the announcement, BMW stock slipped 1.4%, Volkswagen’s shares were 2 percent lower and Daimler’s fell 1.8 percent. Trump added over the weekend that the new tax would impact the entire German auto industry.

Trump Eyes German Car Makers

The New York City billionaire made the comments during an interview with the German magazine Bild, which appeared Monday. He said he had nothing against automakers that build their products overseas. However, if those companies plan to sell the cars to the U.S. they ought to know there will be a special tax of 35 %, Trump said.

Germany’s economy minster Sigmar Gabriel believes the U.S. should better focus on manufacturing better cars than penalizing Germany’s car industry. Gabriel speculates the tax will only make the U.S. industry’s output “worse, weaker and more expensive”.

Mercedes-Benz and BMW have factories that produce cars on U.S. soil too. These plants manufacture SUVs that later reach the European and Asian markets. The two companies along with VW, however, produce many cars destined to the U.S. market in Mexico. They argue the labor costs there are infinitesimal.

In 2016, BMW invested in a new plant in San Luis Potosi for the production of its well-known luxury 3 series. The estimated output for the plant is around 150,000 cars per years starting 2019.

After the Bild interview, BMW said it keep to its plans. The company explained the car produced in the new plant would reach the global market. The new Mexico plant will “complement” other similar facilities in China and Germany, the company added.

Volkswagen opened a $1.3-billion plant in Puebla, Mexico, last year. In 2018, Daimler will start the production of Mercedes-Benz cars at a $1-billion location in Aguascalientes.

Other Auto Makers Threatened with Higher ‘Border Taxes’

This month, Trump threatened other car makers about raising tariffs. He told Toyota there would be consequences if the company builds its Corollas in Mexico to sell them in the U.S. The billionaire didn’t go into details but said there would be a “big border tax” on Toyota vehicles.

Even the American car industry clashed with Trump over the same practice. The president-elect, who plans to prevent jobs from leaving the U.S., slapped Ford Motor with similar criticism early this month. Shortly afterwards, the No. 2 U.S. automaker ditched a plan to build a new plant in Mexico and invested a large part of the money in a Michigan plant.

Moreover, the president-elect threatened both Ford and GM with “big border tax” on vehicles produced outside the country. Ford, however, said Trump’s remarks did not spur the decision. Instead, a lower demand on the U.S. market for Mexico-made small cars had the biggest say in the move.

Ford will no longer invest $1.6 billion in a Mexican facility in San Luis Potosi, an investment the billionaire had called an “absolute disgrace” during the presidential race. Ford will redirect $700 million to a Michigan plant that focuses on electric vehicles and self-driving cars.
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