A war of words has erupted between USA President-elect Donald Trump and German politicians overnight.
Speaking to German newspaper, Bild, former businessman/reality TV star Trump laid out his plan for a 35-percent tax on German cars not built in the USA – which will also apply to all other foreign-made cars as part of his “big border tax”, a central pillar of the Trump election campaign.
"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 according to a translation by Reuters.
According to Reuters, Trump doesn’t believe Germans are buying enough Chevrolets compared to US consumers who are currently buying big with manufacturers such as Mercedes-Benz.
This prompted Germany’s deputy chancellor and minister for the economy, Sigmar Gabriel to issue a scathing and withering rebuttal.
"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% tariff,” he said according to The Guardian.
“I believe it would make the US car industry weaker, worse and above all more expensive."
When asked what it would take for Germans to buy more American vehicles, Gabriel responded with a terse, “build better cars.”
Like many of Trump’s policies, there is much bluster and very little detail. It is uncertain if the proposed 35-percent ‘border tax’ will only apply to cars built completely overseas, or whether it will extend to parts supplied by German companies. Recently, cars built in Mexico (whether by domestic US brands like Ford or GM, or by foreign companies like Toyota) have also been identified by the President-elect as prime targets of his ‘big border tax’.
What Trump may not realise is that BMW’s largest plant is already placed in the US, with the Spartanburg, South Carolina plant exporting 65-percent of the 400,000 cars it produces annually to foreign markets. That manufacturing plant alone employs 8,000 people, and presently builds the BMW X3, X4, X5 and X6.
Meanwhile, Mercedes-Benz exports $1.33billion (US$1bn) worth of product from its Tuscaloosa plant in Alabama, where 300,000 SUVs are built.
Volkswagen also has a plant in Chattanooga, Tennesee, which builds both the Passat and upcoming Atlas, employing 3,500 workers.
With Trump’s presidency still yet to commence, there may still be some time yet before his automotive industry policies become fully fleshed-out. At this point, however, it appears Trump’s plans to introduce severe import tariffs may hinder rather than help the country’s domestic automotive industry.
After all, there’s no point creating more jobs in vehicle assembly if the cars being built become too expensive for the millions of middle-class Americans that presently buy them.