Donald Trump's 35 per cent border tax threat hits shares in German car companies

Rebecca Smith
The incoming President said he will impose a border tax of 35 per cent on vehicles imported to the US
The incoming President said he will impose a border tax of 35 per cent on vehicles imported to the US (Source: Getty)

President-elect Donald Trump's warning that he'll impose a 35 per cent border tax on vehicles imported to the US has buffeted German car firms' shares.

Trump had told German newspaper Bild: "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 per cent tax."

VW shares dropped two per cent, BMW's were down 1.4 per cent, while Daimler's dropped 1.8 per cent on the news.

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"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," Trump said.

The German car firms have invested substantially in factories in Mexico where production costs are lower. BMW has committed to building the BMW 3 Series from 2019 at a plant in the Mexican city of San Luis Potosi.

The company's sales and marketing director Ian Robertson had said last week: "I don't think there's any discussion that BMW is not at home in the US."

Next year Daimler plans to start making Mercedes-Benz vehicles at a $1bn (£828m) factory it jointly owns with Renault-Nissan in Aguascalientes.

In response to Trump's comments, Germany's deputy chancellor and minister for economic affairs, Sigmar Gabriel, said that a tax on German imports would lead to a "bad awakening" among US car firms, due to their reliance on transatlantic supply chains.

Read more: BMW commits to Mexico plant as Fiat Chrysler wavers

Speaking to Bild, he said: "The US car industry would have a bad awakening if all the supply parts that aren't being built in the US were to suddenly come with a 35 per cent tariff. I believe it would make the US car industry weaker, worse and above all, more expensive."

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

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