Protectionist Fears German Officials Hit Back at Trump

Shares in German carmakers dropped Monday after Donald Trump targeted their plants in Mexico. German politicians including Angela Markel fought back against the U.S. president-elect's remarks, including on NATO and the handling of refugees.
Donald Trump's attack on BMW has provoked sharp reactions from German politicians.

Donald Trump's first interview with European media has elicited sharp reactions from German politicians and business leaders after the U.S. president-elect's threats to BMW managed to push down shares of the country's major carmakers.

Speaking with German newspaper Bild and the Times of London, Mr. Trump warned luxury carmaker BMW it would have to pay a 35-percent levy to import cars from Mexico into the United States. He also reiterated comments during the U.S. election campaign that the western military alliance NATO was “obsolete” and backed Britain's departure from the European Union.

"I think we Europeans have our destiny in our own hands," came the response Monday afternoon from German Chancellor Angela Merkel in Berlin. Asked about the effect on U.S.-German relations, she said she preferred to wait until Mr. Trump was actually in power – his inauguration is set for Friday – before making a judgement.

Mr. Trump's remarks sent shares in BMW, Mercedes-maker Daimler and Volkswagen down as much as 2.2 percent by Monday in Frankfurt. Yet German officials across the political spectrum quickly came to their defense, predicting Mr. Trump’s protectionist threats would backfire.

“The American car industry will become worse, weaker and more expensive,” Sigmar Gabriel, Germany's deputy chancellor, who also serves as economics minister, told Bild. He added that German and European businesses should show some "self-confidence" in their future dealings with the United States.

Foreign Minister Frank-Walter Steinmeier said NATO partners were worried about Mr. Trump’s remarks on the trans-Atlantic military alliance. The president-elect’s comments contradicted those of the designated U.S. defense minister, James Mattis, who told U.S. lawmakers last week that NATO remained essential to the United States.

“We have to see what consequences this will have for U.S. policy,” Mr. Steinmeier told reporters in Brussels.

Has Trump even thought for one second about what our response could be to import tariffs? Ulrich Kelber, Deputy minister, German justice and consumer ministry

Mr. Steinmeier also warned the president-elect against going back on U.S. trade commitments. “We assume that our American partner will continue to meet international law and WTO rules.”

Germany's foreign minister wasn't the only one to question whether Mr. Trump's aggressive line violates the rules of the the World Trade Organization, which lays down the principles of trade among its member states and counts both the U.S. and Germany as members. Eric Schweitzer, head of Germany's chamber of commerce and industry DIHK, said he "couldn't imagine" that an import tax imposed between Mexico and the United States would be legal under the rules.

Anther government official went as far as to suggest retaliation: "Has Trump even thought for one second about what our response could be to import tariffs?" Ulrich Kelber, a deputy minister of Germany's justice and consumer ministry, wrote in a tweet Monday.

Ms. Merkel also defended her refugee policy, which Mr. Trump called a "catastrophic mistake" in the interview and blamed for eroding German security. "I would once again clearly separate the matter of refugees" from the issue of tackling terrorism in Germany, Ms. Merkel told reporters in Berlin, noting that many Syrians who arrived in the country last year had not only fled a civil war but terrorism in their own country.

Earlier this month, Mr. Trump repeatedly threatened to impose a tax on carmakers like Ford, General Motors and Toyota if they export cars from plants in Mexico to the U.S. market. Germany's carmakers have long been concerned that they could be next in the firing line, while business worry the threats are already starting to have an effect on global growth and trade.

“The uncertainty about the economic course in the United States has continued to increase since Donald Trump’s election,” Carl Martin Welcker, head of Germany's Mechanical Engineering Industry Association, said in a statement Monday. “We are very concerned about this. Threatening with import duties, irrespective of the industry or country, is leading to a reluctance to invest, which is already noticeable in capital-goods production.”

Mr. Gabriel, the deputy chancellor, said it remained to be seen if Mr. Trump would actually be able to implement import tariffs as he has threatened. Republicans in Congress would have to back such policies. “These are politicians who actually want the opposite of what Mr. Trump wants,” he said.

Germany's unions, normally more skeptical of global trade deals, also issued sharp rebuttals. Reiner Hoffmann, head of the umbrella German trade union DGB in a statement said Mr. Trump was "completely blind to the economic inter-connections." A policy of import levies would affect not just the economies of Germany and Europe but the United States itself, he warned.

BMW itself seemed undeterred by Mr. Trump’s words. The Munich-based carmaker said it would continue with plans to build its $1-billion Mexican plant in San Luis Potosi.

“The plant in Mexico will produce the BMW 3 Series for the world market and be completed in 2019,” BMW executive Klaus Fröhlich told German business weekly WirtschaftsWoche, a sister publication of Handelsblatt Global.

BMW sells around 15 percent of its cars in the United States and the company’s largest factory in the world is located in the United States, in Spartanburg, South Carolina.

 

Gilbert Kreijger is an editor with Handelsblatt Global, covering companies and markets. Christopher Cermak of Handelsblatt Global and Dietmar Neuerer of Handelsblatt contributed to this story. To contact the author: kreijger@handelsblatt.com

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