It makes it fair, theoretically, because the German good will face a sales tax in the US instead of a VAT.
It's not fair, though, because sales taxes here are considerably lower than VATs.
When trade rules between the US and Europe were hashed out 20 years or so ago, I've read that Europe had much lower VATS. 12% jumps to mind, but I can probably find out. That made the initial gap between a sales tax and a VAT much smaller. VATS, however, have steadily increased as EU indebtedness grew.
One problem appears to be with the WTO because there have been appeals made by US manufacturers to be allowed to have offsets of some kind. Say a tarrif or an import tax. Something to even things up.
If Trump wants to get serious about protecting American manufacturing, he may have to pull us out of the WTO. This could be the start of the trade wars everyone worries about. Maybe, maybe not. We are still the alpha dog when it comes to consumption. Everybody wants access to the US consumer.
As for trade wars, if it comes to that, if not now, then when? VATS are not going down and neither are manufacturing costs. Skilled manufacturing laborers have been squeezed dry and if their wages should somehow rise by much, then automation comes in. The key, it seems to me, is for American exporters to achieve greater profitability. Cutting corp. taxes a little along with breaking down the most egregious trade barriers would be gigantic. |
