FRANKFURT -- Shares in BMW, Daimler and Volkswagen Group extended losses in Frankfurt on Friday after U.S. President Donald Trump threatened to slap tariffs from next month on imports from Mexico, where the big three automakers have plants.
Shares in the companies, which build in Mexico to take advantage of lower labor costs and U.S. trade deals with its southern neighbor, were down by as much as 2.9 percent by 09:00 CET.
Shares in Asian automakers also dropped overnight as companies including Toyota, Nissan, Honda and Mazda, who also have factories in Mexico, were hit by the threat.
Trump said he would hit goods coming from Mexico with a 5 percent tariff and would hike that levy each month until it hits 25 percent on Oct. 1, unless Mexico takes immediate action against illegal immigration across the U.S. border.
A spokesman for VW unit Audi said the company was watching developments very closely but it was too early to speculate on outcomes.
A note by car analyst Arndt Ellinghorst described German automakers as exposed, noting BMW's new plant at San Luis Potosi represented nearly 20 percent of its production for North America.
An auto industry source said the situation was puzzling in that the migration issues belonged to the political stage and came despite an update to the North American Free Trade Agreement (NAFTA) in the making for this summer.
It also came as the EU and the United States are working to avoid an escalation in trade conflicts.
Commerzbank strategist Ulrich Leuchtmann said: "The U.S. trade policy has taken a qualitatively different turn. Using tariffs as a tool for non-economic goals is something which brings a new quality to proceedings."