BMW Shares Fall As US President Elect Targets The German Auto industry

Shares in BMW, as well as in Volkswagen and Daimler, plummeted yesterday morning after President-elect Donald Trump threatened to impose a 35% border tax on foreign exports to the US in an interview with German magazine ‘Bild’

 

Shares in premium German car manufacturers BMW, Daimler and Volkswagen fell yesterday morning as a result of comments made by Donald Trump in an interview with Bild magazine regarding the imposition of a hefty border tax on foreign commodities. There has since been a substantial decrease of over €4.5bn (£3.95bn) in the market value of Germany’s major car companies after the President-elect threatened to tax a staggering 35% on goods imported from abroad to the US market.

 

According to Reuters, Trump’s comments suggest that the carmakers will have to move new developments to the US if they hope to maintain their current market value. Once more, the threats made by the US President-elect come at a time wherein all three of the companies in question have invested heavily in building new plants in Mexico, with ambitions to export smaller vehicles to the US market.

 

Trump singled out BMW in his attack of the expansion of the German auto-industry, adding “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”.

BMW share prices

BMW share prices, courtesy of Bloomberg

 

Furthermore, in the aftermath of the border tax comments made yesterday, BMW has witnessed shares fall by nearly three percent, and were down 1.15% at €85.66 in Frankfurt trading by the afternoon of Tuesday 17 January. Such a predicament mirrors the state of the Bloomberg Europe 500 Autos Index, which was down almost 1.7% as of Monday 16 January.

 

Moreover, Trumps’ threats, which imminently affect the expansion plans of the German auto-industry, coincided with similar warnings issued in the direction of Ford Motor Co. and Toyota Motor Corp, for whom conciliatory gestures have since been exhibited. That is, Ford has terminated its agenda to build a $1.6bn factory in Mexico in favour of expanding an existing site in Michigan, USA. Toyota, who come 2019 had planned to begin producing cars at a new site also in Mexico, has since claimed that the firm will take Trump’s policy into account with regards to its future developments.

 

On the contrary, German senior officials were hardly intimidated by the ultimatum posed by the President-elect. Sigmar Gabriel, Germany’s deputy chancellor and minister for economic affairs, is quoted in Bild as claiming that taxing German import could invoke something of a “bad awakening” in the case of US car manufacturers who rely heavily on the transatlantic supply chain. “The American car industry will be worse, weaker and more expensive,” Gabriel has stated. Likewise, Matthias Wissmann, President of the German Association of the Automotive Industry, declared in a recent email that “in the long term, the United States would be shooting itself in the foot by imposing tariffs or other trade barriers”, suggesting that the German auto-industry remains unshaken by Trumps comments, despite falling share prices and declining market value.

 

Thus, notwithstanding Trump’s threats of a ‘big border tax’, BMW has vowed to commit to its plans for building new developments in Mexico. Ian Robertson, the sales and marketing director of the company, wrote to the BBC that BMW remained “absolutely committed” to the development of its new site in San Luis Potosi, hence avoiding the current trend being established by the likes of Ford and Toyota of increasing their domestic investments or relocating factories back onto US soil.

 

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Post by: Kathleen Aine Craig, Accendo Markets

“Hungarian-American Business magnate George Soros once said that “markets are constantly in a state of uncertainty and flux, and money is made by discounting the obvious and betting on the unexpected.” On account of this, I am eagerly anticipating the effects of the highly ambiguous Trump administration and the recent EU referendum on the development of stock markets worldwide. I have an academic background in Philosophy from the University of Edinburgh, and coupling this with my life-long interest in economics has lead me to pursue an enquiry into the intersection between behaviouralism and economic growth, of which my current undergraduate thesis on the philosophy of economic models is a testament to.  Most recently, I have been studying the performance of foreign stock markets amidst a highly uncertain political backdrop for investors, wherein my primary line of enquiry lies in the interfacing of economy and governance”.