In an interview with the London Times and Germany’s Bild President-elect Donald Trump managed to dismiss the European Union as a tool for expanding German exports and to label NATO as obsolete.
Trump praised the Brexit vote saying that people “want their own identity.” He continued “Brexit is going to end up being a great thing.” And pledged that a trade deal between the United States and the United Kingdom was a high priority for his new administration. Other countries, he predicted, would follow the United Kingdom out of the European Union. The U.K. is smart to leave the bloc because the EU “is basically a vehicle for Germany,” the Times quoted Trump as saying.
NATO, Trump said, is “obsolete because it wasn’t taking care of terror. In the Bild version of the interview Trump is quoted as saying “It’s obsolete, first because it was designed many, many years ago. “Secondly, countries aren’t paying what they should.”
Trump also had words for German Chancellor Angela Merkel and German automaker BMW. Merkel, who faces a tough re-election campaign, “had made one very catastrophic mistake and that was taking all of these illegals.” Asked if he respects Merkel, Trump said he doesn’t know her. Trump also said that the US would impose a border tax of 35% on cars that BMW plans to build at a new plant in Mexico and export to the United States. Trump called on the company to scrap plans to open a plant to build 3 Series sedans at San Luis Potosi starting in 2019 and instead build a factory in the United States.
Shares of German automakers fell on publication of the interview. BMW shares were down as much as 2.7%. The Bloomberg Europe 500 Autos Index was down about 1.7%.
BMW, which has made cars at its plant in Spartanburg, South Carolina for more than two decades, plans to expand capacity there to 450,000 units annually from about 411,000 in 2016. The factory makes almost all of the SUVs that BMW sells worldwide and is one of the largest exporters of vehicles from the United States. Mercedes-Benz and Volkswagen also have factories in the U.S. and more than half of the vehicles made by German companies there are exported.
The pound took another beating today on Trump’s remarks and ahead of a speech tomorrow by Prime Minister Theresa May that is widely expected to talk about a hard Brexit from the European Union. The pound fell below $1.20 for the first time since October.