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Politics : The Trump Presidency -- Ignore unavailable to you. Want to Upgrade?

To: TimF who wrote (4897)	1/5/2017 7:05:00 PM
From: Katelew	Read Replies (1) \| Respond to of 361821

I think if the sales tax was 20% AND the EU carmaker had to pay it (like the US car maker has to pay the VAT), the US car makers would sell more cars in the US. There would be less competition from the EU car makers in other words. That's assuming that price competition was the main factor, which of course is not likely.

To: TimF who wrote (4897)	1/5/2017 8:11:49 PM
From: TimF	Respond to of 361821

If I'm a European consumer the VAT doesn't make me more likely to buy European. If I'm an American consumer it doesn't make me more like to buy European either. I'm still examining my views here, developing them as I go along rather then defending an existing opinion. The consumer it seems wouldn't have any more incentive in either case to buy European. What about the producer? Well if the good isn't in tight supply, I don't think it would matter much. The producer is just going to sell it wherever he can. What about where the good is in tight supply? Well then the producer might have more say in where its sold (assuming its in strong demand in both Europe and the US (the scenario is only considering these two to simplify things rather then looking at the whole world market), and the VAT rebate would encourage a sale in the US rather then the EU. But how much of trade is for items that are in massive demand in both the US and the EU and tight supply? Not much I think. Partially because supply of most items isn't that tight, but also because if supply is tight your not going to sell as many, you don't have as many to sell. Also if supply is tight, margins will probably be high, resulting in an increase of production of your product and close substitutes getting rid of the tightness. That is unless you have a monopoly on the product itself and no close substitutes but how much of US to EU trade involves that? Probably not much, maybe some drugs since there is patent protection. But a lot of drugs have substitutes, and high profits encourage investment in developing substitutes if there are any, also I doubt "high demand drugs in limited supply with no close substitutes" represents a major part of US-EU trade. There may be other ways were you get a small disproportionate impact on trade from VATs, but I can't see how it is large or consistent enough to really be considered a trade barrier or major distorter of international trade. It normally will come down to what the customer wants and the customer isn't incentivized by the VAT to buy European or avoid American. Any effects like what I mentioned above, if they function at all, would be rather tiny. An issue that is more connected to the trade imbalances is the US's chronic budget deficit. All the dollars going to T-bills would have to go somewhere if all those Treasures were not for sale. OTOH I don't see how this could be the key factor because many countries that the US has trade deficits with also have large chronic budget deficits. And also have low savings rates. (But China has a high savings rate. Japan does as well, but it has really huge government deficits to soak up that savings.)