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Trump threatens German carmakers with 35% U.S. tariff

Reuters FRANKFURT/BERLIN (Reuters) — U.S President-elect Donald Trump warned German car companies he would impose a border tax of 35 percent on vehicles imported to the U.S. market, a plan that drew sharp rebukes from Berlin and hit the automakers’ shares.

In an interview with German newspaper Bild, published on Monday, Trump criticized German carmakers such as BMW, Daimler and Volkswagen for failing to produce more cars on U.S. soil.

“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 percent tax,” Trump said in remarks translated into German.

“I would tell BMW that if you are building a factory in Mexico and plan to sell cars to the USA, without a 35 percent tax, then you can forget that,” Trump said.

Volkswagen (VW) shares closed down 2.2 percent, while BMW and Daimler’s shares ended 1.5 percent lower.

Under pressure to deliver on campaign promises to revive U.S. industrial jobs, Trump has turned his fire on carmakers that use low-cost Mexican plants to serve the U.S. market. He has also warned Japan’s Toyota it could be subject to a “big border tax” if it builds its Corolla cars for the U.S. market at a planned factory in Mexico.

All three German carmakers have invested heavily in Mexico, but also pointed out on Monday that they manufacturer in the United States as well.

BMW executive Peter Schwarzenbauer told reporters the company was sticking to plans to invest around $1 billion in a new plant in Mexico, which is due to go into production in 2019 and create at least 1,500 jobs.

“The president’s powers are considerable. He can legally impose tariffs of up to 15 percent for 150 days. Trump is not constrained by Congress,” said Simon Evenett, professor of international trade at Switzerland’s University of St. Gallen.

“Even if foreign companies object and seek to challenge the legality of tariffs, it will take at least 18 months to get decided. Corporate strategies will be disrupted by then.”

While investing in Mexico, German carmakers have quadrupled light vehicle production in the United States over the past seven years to 850,000 units, more than half of which are exported from there, Germany’s VDA automotive industry association said.

“In the long term, the United States would be shooting itself in the foot by imposing tariffs or other trade barriers,” VDA President Matthias Wissmann said in a statement.

German carmakers employ about 33,000 workers in the United States and German automotive suppliers about 77,000 more, the VDA said.

Speaking in tabloid newspaper Bild, German Economy Minister Sigmar Gabriel said that rather than trying to penalize German carmakers, the United States should instead respond by building better and more desirable cars.Speech

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