White House denies Trump threatened German automakers

Key Points
  • The White House has pushed back on German media reports that President Donald Trump threatened to stop the sales of German cars in the United States.
  • Still, the administration is complaining about the U.S. trade deficit with Germany.
  • But major German automakers like BMW, Audi and Mercedes-Benz house plants in the Southern U.S.
German automakers a Trump target?

The White House is shooting down reports in a German newspaper that President Donald Trump told leaders in Europe he would stop German car sales to the U.S.

The story was filed by the German newspaper Spiegel on Thursday. Since Trump's alleged threat was not recorded on audio or video, journalists brought it up Friday with Gary Cohn, the White House's chief economic advisor. Cohn said the reports are not true.

While the White House denies it's attacking German automakers, it's still complaining about the trade deficit with Germany.

Last year, it totaled $64.9 billion, the third-largest trade deficit the U.S. has with countries around the world. Only China and Japan had larger trade surpluses.

Not surprisingly, the auto industry drives the trade deficit with Germany. According to the Department of Commerce, the U.S. imported $21.6 billion in autos from Germany last year, while it exported $6.1 billion to the European country.

In short, Americans have developed a healthy appetite for BMW, Audi and Mercedes-Benz. Those high-end luxury sedans and sports cars more than offset the growing number of SUVs and crossovers coming from German-brand auto plants here in the U.S.

Truth is, of the 1.3 million German-brand vehicles sold in the U.S. last year, only 1 of 4 were built at U.S. plants. By comparison, two-thirds of the vehicles sold by the Big Three were built in the U.S.

Source: Barclay's

Those numbers explain why the president told the German newspaper Bild earlier this year, "You can build cars for the United States, but for every car that comes to the USA, you will pay a 35 percent tax."

Few in the auto industry, let alone those with German automakers, expect the Trump team to slap a hefty tariff on imported vehicles. Still, they are worried about the perception Germany is interested only in selling cars in the U.S. and not building them here.

In March, BMW CEO Harald Krueger told Trump, "We are proud as we are the biggest net exporter of vehicles in the United States. We have an annual net bill of $10 billion in cars exported from South Carolina. Seventy percent of our production is being exported."

Krueger went on to point out that BMW now employs 9,000 people at its plant in Spartanburg, South Carolina.

Truth is, the Southern U.S. has become a major export hub for German automakers with three final assembly plants anchoring the growth in manufacturing south of the Mason-Dixon line.

The issue for Trump is why BMW, Audi and Mercedes have either built or are building final assembly plants in Mexico instead of expanding their production in the U.S. Those plants south of the border will build models that will eventually wind up in luxury showrooms north of the border.

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