BMW Woos Trump In Race to Retake Luxury Lead

In January, then-president elect Trump told the German newspaper Bild about BMWs coming to the U.S. from a plant scheduled to open in Mexico in 2019 “They can build cars for the US, but they’ll pay 35 percent taxes on every car that comes to the US.”

BMW has fallen to second place in the luxury car market behind rival Mercedes-Benz and its management is desperate to take back the first spot. While doing so though, CEO Harald Kruger is trying to avoid a run-in with Trump, who he recently met with. The Wall Street Journal’s William Boston writes of the encounter:

“I told him that the U.S. is our second home,” Mr. Krüger said of his conversation with President Trump, which was part of a visit to Washington by German Chancellor Angela Merkel….

Mr. Krüger said he took the opportunity of his Washington trip to talk about BMW’s plant in South Carolina, from which it exports SUVs world-wide. He said a border tax wasn’t discussed “but we talked about free trade, which of course is the prerequisite in order to export from the U.S.”

When President Trump met Mr. Krüger he told him the sprawling plant in South Carolina was “incredible,” BMW officials said. The president hasn’t visited the plant. “It is our understanding that he flew over it,” one BMW official said.

In a column published on May 31 by Greg Ip of the Wall Street Journal titled “This Time, Trump Is Right About Trade,” Ip wrote:

President Donald Trump took his bellicose economic agenda abroad last week, blasting Germany for its “very bad” trade surplus—or “evil” as one German newspaper translated it.

Though German Chancellor Angela Merkel did not seem to care for the messenger, she should nonetheless hear the message. While Mr. Trump gets a lot wrong about trade, on this particular point he’s right. Germany’s current account surplus, which combines trade and investment income, is now the world’s largest. Along with China’s, it is a dangerous imbalance that leaves others, including the U.S. and the rest of Europe, worse off.

It’s not just Mr. Trump who thinks so. “The criticism is right. Germany’s trade surplus is excessive,” says Marcel Fratzscher, president of DIW Berlin, a prominent German think tank. Mervyn King, former governor of the Bank of England, went further, arguing, “President Trump is right when he identifies a problem with current international trading and monetary relationships.”

Trump has proven with yesterday’s withdrawal from the Paris climate agreement that he’s willing to do what it takes to put American interests first. Expect to see more trips by foreign CEOs to meet with the president, and more foreign companies building plants in America to avoid potential punitive taxation.