German automakers warned on Wednesday the United States would suffer significant economic damage from imposing trade curbs, after President Donald Trump put renewed pressure on US carmakers to build more vehicles at home. Trump, who took office last Friday, has already signed an order withdrawing the United States from the Trans-Pacific Partnership trade pact and has vowed to re-open the North American Free Trade Agreement (NAFTA) that includes the United States, Canada and Mexico.
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“It’s beyond all questions that should restrictions be made to the NAFTA area, they would first deal a significant blow to the U.S. economy,” said Matthias Wissmann, head of Germany’s VDA auto industry association, adding international trade would also suffer.
German carmakers including Volkswagen and Daimler have increased the number of light vehicles built in the United States sevenfold to 850,000 in the past seven years, with more than half destined for export, he said.
“By putting up tariffs or import taxes, the U.S. would shoot themselves in the foot over the long term,” Wissmann said.
Trump earlier this month warned the United States would impose a border tax of 35 percent on cars that Germany’s BMW plans to build at a new factory in Mexico and export to the U.S. market.
Germany’s three leading carmakers have invested heavily in Mexico where production costs are lower than in the United States, with an eye to exporting smaller vehicles to the world’s No. 2 car market.
Separately, Wissmann said while everything must be done to uphold the free flow of goods and services following Britain’s exit from the European Union, the cohesion of the single market with manufacturers’ access to the remaining 27-nation trading bloc remained top priority.
A so-called “hard Brexit” with Britain leaving the single market “implies significant risks – for Britain as well as for the entire EU,” he said, adding the EU must become more attractive for its remaining members.