President-elect of the United States Donald Trump, in an interview with Germany’s tabloid newspaper, Bild Zeitung, criticized BMW for its plans to build a new plant in Mexico. Calling BMW’s planned investment in Mexico rather than U.S. “a waste of time and money,” Mr. Trump threatened to impose a 35 percent border tax if BMW decides to go ahead with its production plans. He continued to blast Germany’s auto industry as being unfair to the United States in the stated interview.
“When you walk down Fifth Avenue, everybody has a Mercedes-Benz parked in front of his house, how many Chevrolets do you see in Germany? Not many, maybe none, you don’t see anything at all over there. It’s a one-way street.”
Trump raised this question to highlight what he believes to be an “unfair and unbalanced trade” in the auto business.
will only get higher. Car companies and others, if they want to do business in our country, have to start making things here again. WIN!
— Donald J. Trump (@realDonaldTrump) January 15, 2017
Responding to Trump’s complaint, Germany’s Economy Minister Sigmar Gabriel said the following.
‘ It doesn’t help to make others weaker, you don’t yourself get stronger by doing that. The American car industry is getting worse, weaker and more expensive…The U.S. needs to build better cars.’
Mr. Gabriel also added that the high border tariff would hurt America’s economy if imposed. He also stated that he expects Mr. Trump to change after being sworn in as president as that will make him realize the economic links between the U.S. and Germany. Mr. Gabriel’s advice is not to get agitated by this criticism but to move towards an affirmative solution when it comes to Germany’s future dealings with the US.
Matthias Wissmann, president of the German car industry body VDA, reiterated Gabriel’s sentiment calling Trump’s threat as the “U.S. shooting itself in the foot.”
German automakers have a long history of production in Mexico. Due to cheap labor and Mexico’s various free trade agreements, it remains a popular manufacturing location. BMW Group plant in San Luis Potosi, Mexico, is expected to build the BMW 3 series beginning from 2019. ‘It’s a full-blown operation to produce cars for anywhere in the world,’ BMW board member Ian Robertson stated in Detroit’s annual motor show. In the past, Mr. Trump has continued to criticize industries for moving production out of the United States but this specific targeting of the auto industry has raised serious concerns in the automotive global market’s future. As a result of Trump’s comments, German auto industry faced a sudden decline in trading shares.
Earlier this month, Mr. Trump attacked General Motors for building compact cars in Mexico. As a result, Ford canceled plans of its $1.6 billion Mexican expansion. Ford’s CEO Mark Fields called this move as a step towards building positive US business environment, a vote of confidence in the Trump era. Mexico’s auto industry has risen over time owing to North American Free Trade Agreement (NAFTA). Trump during his campaign trail called for the cancellation of NAFTA seeing it as a threat to America’s manufacturing jobs. Mr. Trump’s continued threats are bound to cause ripples in the auto industry trade relationship.
Meanwhile, BMW has its largest exporting plan in South Carolina, the U.S. providing over 70,000 jobs directly or indirectly to Americans. BMW spokesperson stated that the company continues to feel “very much at home in the US,” although its relationship is bound to get affected if Trump’s border tax imposition is a reality in future. Mr. Trump’s comments have caused “surprise and anxiety” among members of the trans-Atlantic alliance. Car exports are integral to Germany’s growing economy, and the U.S. remains one of the most important markets and ally. If Mr. Trump’s anticipated trade barriers are introduced, it will cause a real damper on the economy of both nations.
[Image by Harold Cunningham/Stringer/Getty Images]