Berlin has mounted a staunch defence of its policies after US President-elect Donald Trump criticised German Chancellor Angela Merkel for her stance during the refugee crisis and threatened a 35 per cent tariff on BMW cars imported into the US, the Guardian reported.

"The increase in the number of people fleeing the Middle East to seek asylum in Europe had partially been a result of US-led wars destabilising the region," said Germany's Deputy Chancellor and Minister for the Economy Sigmar Gabriel on Monday in response to Trump's comments on Merkel's refugee crisis stance.

Trump had said that Merkel had made an "utterly catastrophic mistake by letting all illegal migrants into the country".

"There is a link between America's flawed interventionist policy, especially the Iraq war, and the refugee crisis, that's why my advice would be that we shouldn't tell each other what we have done right or wrong, but that we look into establishing peace in that region and do everything to make sure people can find a home there again," Gabriel said.

Gabriel, leader of the centre-left Social Democratic party, was quoted by the Guardian as telling German daily Bild on Monday that a tax on German imports would lead to a "bad awakening" among US carmakers.

"I believe BMW's biggest factory is already in the US, in Spartanburg (South Carolina)… The US car industry would have a bad awakening if all the supply parts that aren't being built in the US were to suddenly come with a 35 per cent tariff," he said.

"I believe it would make the US car industry weaker, worse and, above all, more expensive. I would wait and see what the Congress has to say about that, which is mostly full of people who want the opposite of Trump," he said.

In an interview with Bild and the Times, the US President-elect had indicated that he would aim to realign the "out of balance" car trade between Germany and the US. 

"If you go down Fifth Avenue everyone has a Mercedes Benz in front of his house, isn't that the case," he said. "How many Chevrolets do you see in Germany? Not very many, maybe none at all… it's a one-way street."

Asked what Trump could do to make sure German customers bought more American cars, Gabriel said: "Build better cars."

Gabriel, who is expected to run as the centre-left candidate against Angela Merkel at Germany's federal elections in September, said Trump's election should encourage Europeans to stand up for themselves.