Trump warns German companies of 35% border tax on vehicles imported into the US

US president-elect Donald Trump has warned German car companies that he would impose a border tax of 35 per cent on vehicles imported to the US market, which triggered sharp reactions in Berlin and hit German automakers' shares.

In an interview with German newspaper Bild, published yesterday, Trump criticised German carmakers such as BMW, Daimler and Volkswagen for not producing more cars in the US.

"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 per cent tax," Trump said in remarks translated into German.

"I would tell BMW that if you are building a factory in Mexico and plan to sell cars to the USA, without a 35 per cent tax, then you can forget that," Trump said.

Volkswagen shares closed down 2.2 per cent, even as BMW and Daimler's shares fell 1.5 per cent.

Trump had promised to revive US industrial jobs during his presidential campaign and was now targeting carmakers that used low-cost Mexican plants to serve the US market.

He had also warned Japan's Toyota it could be hit with a "big border tax" if it built Corolla cars for the US market at a planned factory in Mexico.

According to NBC reportedMatthias Wissmann, president of the German automotive industry association VDA said, "In the long term, the United States would be shooting itself in the foot by imposing tariffs or other trade barriers."

Mexico has emerged as one of the world's top five automotive manufacturing sites in recent years, partly due to low labour costs but also due to its signing more free trade agreements than any other country except Israel, auto industry experts noted.