German automotive body, VDA, says the US would be “shooting itself in the foot,” if newly-installed US President, Donald Trump makes good on his comments he could impose a 35% border tax on imported vehicles.
The issue has garnered huge publicity on both sides of the Atlantic as the new American Commander-in-Chief settles down to business after his controversial inauguration speech last Friday (20 January) in Washington, which appeared to heavily criticise his predecessors as President, three of whom were sat directly behind him.
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Trump has centred a number of global automakers in his sights, namely Ford, General Motors and Toyota for their North American manufacturing sourcing strategies, while also appearing to take aim at German OEMs and questioning why so few American vehicles were on the streets of Berlin for example.
But the powerful VDA, while insisting it takes President Trump’s comments “seriously,” is cautioning the US would be doing itself a major disservice if it carried out its new chief’s threats to penalise production in Mexico, destined for export into America.
“We take the [Trump] statements seriously,” said VDA president, Matthias Wissmann. “However, first of all we have to wait and see whether these announcements will be put into effect by the US administration and if so, in what form. There may well be considerable resistance in Congress to plans for an import tax. Investment decisions in the automotive industry are planned for the long term and are not thrown overboard at the drop of a hat. The German automotive industry is active around the world.
“Restrictions within NAFTA would have a major adverse effect on the economy and no one is going to want that. For German automakers, the US is not only the second largest export market, but also an important production location supplying the global market.
“During the past seven years we have quadrupled our US light vehicle production to 850,000 units. More than half of all vehicles built by German OEMs in the US are exported.
“If the US introduced import duties or other trade barriers, it would be shooting itself in the foot in the long term because in times of globalisation and international value chains, good trade relations are decisively important for economic growth.
“One can only warn against the spreading worldwide tendencies toward protectionism which ultimately will only damage every single country, despite apparent short-term advantages.”
