Germany carmakers Volkswagen, BMW and Daimler have witnessed a decline in their shares after President-elect Donald Trump insisted that Mexico car makers will be taxed 35% upon exportation to the US, reports The Wall Street Journal.
Mr. Trump had advised the manufacturers not to “waste their time and money” by operating their Mexico factories.
He went on to say that any move by BMW to sell Mexico-made cars in the US would see the factory charged a 35% tax.
The German business sector translated the comments as a threat to all the car firms.
Upon the announcement, VW went down 1.8%, BMW shares fell by 1.5% in Frankfurt and Mercedes Benz owner Daimler dropped 1.6%.
While speaking to German newspaper Bild, Mr. Trump said: “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% tax. I would tell BMW that if you are building a factory in Mexico and plan to sell cars to the US without a 35% tax then you can forget that.”
Build better cars than us
While responding to the comments, German economy minister Sigmar Gabriel asked the US to build better cars than them and not penalize. He said that such kinds of tax imposition would only serve to “worsen, weaken and make the American car industry more expensive.”
The country’s finance minister – Wolfgang Schaeuble – also turned to a newspaper to launch an attack against Mr. Trump.
He told the Wall Street Journal that “Whoever wants growth, and I trust this administration [Mr Trump’s] will be a growth-friendly one, must be in favour of open markets.”
He said that protectionism will only be beneficial for a short term but has long term effects.
Both BMW and Mercedes-Benz have built large US firms in which they manufacture sports utility vehicles (SUVs) for export to Asia and Europe.
But they also have factories in Mexico, which is reputable for lower labour costs.
Car factories growth
BMW began to establish a plant at San Luis Potosi in 2016. It plans to use this for production of 150,000 3 Series vehicles by 2019.
While commenting on the policies of America’s next president, BMW said that it would stick to its plans. “The production is aimed at the world market. Therefore the plant in Mexico will complement … the production plants in Germany and China.”
Volkswagen also started to establish a $1.3bn factory near Puebla last year while Daimler has plans to begin manufacturing Mercedes-Benz vehicles at a $1bn plant that it jointly uses with Renault-Nissan in Aguascalientes.