Trump comments hit shares in German carmakers

Shares in German carmakers BMW, Volkswagen and Daimler have fallen after Donald Trump warned that cars built in Mexico would be taxed at 35% if they were exported to the US.

The President-elect said he would advise car firms "not to waste their time and money" by building factories in Mexico.

If BMW sold cars into the US they would have to pay 35% tax, he added.

Mr Trump's comments were seen in Germany as a threat to all car firms.

BMW shares fell by 1.5% in Frankfurt, VW was down 1.8% and Mercedes Benz owner Daimler dropped 1.6%.

Mr Trump told German newspaper Bild: "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% tax.

"I would tell BMW that if you are building a factory in Mexico and plan to sell cars to the US without a 35% tax then you can forget that," he added.

German economy minister Sigmar Gabriel said that rather than trying to penalise German carmakers, the US should instead build better and more desirable vehicles.

Imposing tariffs would make the American car industry "worse, weaker and more expensive", he added.

Meanwhile, Germany's finance minister, Wolfgang Schaeuble, used a newspaper interview to attack the President-elect.

"Whoever wants growth, and I trust this administration [Mr Trump's] will be a growth-friendly one, must be in favour of open markets," he told the the Wall Street Journal.

Mexican factories

"Protectionism can afford short-term advantages, but is almost always damaging in the long term," he added.

BMW and Mercedes-Benz already have sizeable factories in the US where they build sports utility vehicles (SUVs) for export to Asia and Europe.

But both companies, as well as VW, have factories in Mexico, where labour costs are far lower.

A Bosch factory worker in San Luis Potosi, Mexico

Last year, BMW started building a plant at San Luis Potosi where it plans to produce 150,000 3 Series vehicles a year from 2019.

BMW said it would not change its plans: "The production is aimed at the world market. Therefore the plant in Mexico will complement ... the production plants in Germany and China.''

VW started production last year at a $1.3bn factory near Puebla, and next year Daimler plans to start making Mercedes-Benz vehicles at a $1bn plant it shares with Renault-Nissan in Aguascalientes.

Earlier this month, Mr Trump tweeted that Toyota would face hefty tariffs on cars built in Mexico for the US market if it builds Corollas south of the border.

He said the Japanese company would be hit with a "big border tax" if the plan went ahead.

American car companies have faced harsh criticism from Mr Trump for building cars more cheaply outside the US.

Ford has said it will cancel a $1.6bn (£1.3bn) plant it planned to build in Mexico and instead extend operations at its factory in Michigan.

The US car giant will spend $700m on expanding the plant at Flat Rock.