Donald Trump’s announcement of tariffs on EU products was met with outrage from Ursula von der Leyen and European elites and appears to have sparked a veritable trade war, with both sides brandishing the threat of further tariffs. But in a long, detailed – and quite funny – article for the German collective blog Achse des Guten (Axis of Good), the consultant and commentator Michael Alberts argues that the only reason there has not been a trade war much earlier is because the US was not fighting back. Donald Trump is right. The EU started the war by imposing tariffs and all sorts of other encumbrances on US (and other foreign) products.
Using a traditional German saying, Alberts wryly observes that when the Europeans point the finger at Trump, “three fingers of their hand are pointing back at them”. He notes that the EU’s notoriously complex web of regulations already represents a massive trade barrier for non-EU manufacturers, who often would need to alter their products even just to enter the EU market. But EU protectionism is also more explicit. Alberts explains:
The EU itself levies considerable import duties on imports from outside the EU. The amount depends on the specific product: a science in itself. Instead of a clear table, the EU offers importers internet-based query forms, so that there is little public transparency. In general, the tariffs appear to reach up to 25% of the import value; for typical consumer goods they appear to be 12 or 14% (textiles or computer monitors)… On the other hand, import duties on EU products to America have so far only been a maximum of 5%. Starting on April 2nd, the US Government will introduce a system of “reciprocal tariffs”, i.e., the same tariff level in both directions. If the EU imposes a 10% tariff, the same will apply in the other direction with immediate effect. What is unfair about that?
Moreover, Alberts argues that even Trump’s criticism of the discriminatory impact of European value-added tax is not so off-the-wall or “stupid” as it has been made out to be. He continues:
The new US Government is also denouncing the EU’s import VAT. The intricacies of tax law are confusing, but considered in the abstract, Donald Trump’s complaints are not far-fetched: the result of the VAT is to directly place a burden on the consumption of end users; in Germany, it is quite high at 19% normally. In the USA, there is no such tax at the national level, but in the individual states and municipalities; its overall level is somewhere between 5-10%, so typically 10 or more percentage points lower than here [in Germany].
America thus relies more heavily on income and corporate taxes (hence on production) as sources of public financing, while Germany draws more heavily on consumption. Why does this give rise to a distortion of competition? To use an ideal-typical exaggeration, if there were only income taxes in one country and only taxes on consumption in another, exporters from the first to the second country would be double-taxed, while in the other direction, they would not be taxed at all! The imbalance is obviously discriminatory.
If Donald Trump is not the one who originally disturbed the peace, but only wants to reduce obvious injustices in foreign trade in the interest of his compatriots, why the loud and hypocritical clamour, especially in Europe? Because some have become so accustomed to the way things have been for decades that they regard the cozy status quo as “normal”, and any change that is to their disadvantage is perceived as an aggravating disturbance.
Michael Alberts’s full article is available in German on the Achse des Guten website here. Translation by Robert Kogon and DeepL.
Robert Kogon is the pen name of a widely-published journalist covering European affairs. Subscribe to his Substack.
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No surprise. Same as the Kindergarten Canadians. Some tariffs as high as 300%. Then they complain that The Tronald is mean and Adolf Hitler (as always).
The EU has always been a protectionist regime since its foundation as a political-economic rival to the US.
I may be wrong but most European countries trade policies were of a mercantilist type. Germany’s trading policy was known as Zollverein which was really the antithesis of Britains free trade approach.
So if I’m reading this right, The Donald is merely Taking Back Control?
Meanwhile, like Tory predecessors, Sir Two-Tier blithely gives away control to all and sundry.
Interviewer in 2023: Westminster or Davos?
Starmer: Davos.
My memory is foggy. I recall in prior Trump administration the US Gov’t worked hard with UK to get a post-Brexit Trade Agreement.
My memory is that UK resisted. Reasons are many, probably.
I don’t see any current media reports to re-start this bilateral US/UK Trade Agreement. Certainly such an agreement is the process to alleviate this issue–better than what seems to be happening now, IMHO.
My memory may be flawed or it was reported erroneously at the time. I of course was not in the meetings.
The Bidentard regime was pro EU. No interest in a trade deal with the UK. Went nowhere. The Tronald has issued 25% tariffs on UK steel, mfg. This will likely be rescinded after some behind the doors discussions. There is no point in a tariff escalation war. Keep the baby toys in the pram.
Gene-manipulated food is meanwhile sold in the UK¹. This suggests that some sort of agreement must have been reached.
¹ I recently bought some “extended shelf life” cooking oil because I had to. The small print on the bottle stated that it had been produced from genetically manipulated soy beans.
there are no no-genetically modified soybeans , anywhere in the world.
Maybe. But I’ve never encountered label stating that before and importing this into the EU wouldn’t be allowed.
Yes it would. Genetically modified crops are grown in EU and products on shelves too.
Gmo has been going on for well over ten years in the Uk, if not longer.
The problem is we are still linked to the Fourth Reich Customs Union, so making trade agreements with other Countries has to take into account what the Fourth Reich wants.
Much of this is due to non-tariffs, where the UK has to apply the same “standards” to its own goods and those coming in from outside the Fourth Reich. This makes exporting goods from the UK into the Fourth Reich less complicated because “standards” are the same.
Also if the import has a lower tariff than it would if imported into the Fourth Reich, and if that good is re-exported from UK to Fourth Reich, the UK must collect that tariff difference and remit it to the IVth Reich. This makes things very complex, so easier to use IVth Reich tariffs/non-tariffs. In fact nearly all the post-Brexit trade agreements were just roll-over agreements to what the UK had when it was part of the Reich.
In other words, Brexit In Name Only. The purpose of Brexit was to regain our border control – FAIL, and for better trade (more choice, lower prices for consumers, easier export markets) with non-Reich Countries – FAIL.
The political will to get away from that European midden was never there nor is it now.
Why is britain such a complete mess. It is because of riddles. Everything you do that is of consequence to humans is a riddle. Tied up in legal speak by a load of clowns. This country will never be great again, because it never was great in the first place. At least not for the average Joe.
Honesty left the EU building a long time ago.. actually I suspect it never entered in the first place.
Isn’t that the whole point of the EU – if you have to join the club and jump through hoops to do business freely within the EU, they are hardly going to make it easy for anyone outside the EU to do business with them.
The whole point of the Customs Union is protectionism …. and not just against American products.
It protects domestic producers – those with political clout and which are Government cronies.
The consumer pays and is made poorer.
Isolationism. Look where it has gotten the eu.
I didn’t really know about this tariff imbalance but it doesn’t surprise me – assuming it’s the full picture.
I’m not sure it is though, is it?
Don’t things like subsidies play a significant role as well?
They might also be skewed in the EU’s favour, I don’t know. I am under the impression that US industries have strong lobbies and get all sorts of favourable terms for themselves.
I just have a feeling this is all a lot more complicated than this, which I won’t tire of saying should not be the case. It’s all different modes of central planning which ultimately just screws ordinary people.
No, it is quite simple until the eu and Uk put their never ending spin on it. Don’t you people get tired of this confusion?
The remark about VAT is obviously bovine manure because exporters don’t pay consumption taxes, the people paying for their goods do¹.
¹ Consumption taxes, like all other indirect taxes, are a rip-off of poor people in favour of rich people. Rich people only pay direct taxes on a large part of their income because they don’t have to consume it. Poor people pay double taxes on all of their income because it’s taxed once before they get it and taxed again, possibly multiple times, as indirect taxes often stack up, when they spend it.
I concur with your comment. If a German car factory purchased parts from another German factory it would pay VAT (input tax) on those purchases. However it would charge the German public VAT (output tax) on the sales of its finished cars. That’s how VAT works – the public, as tail-end-charlie, picks up the tab.
If the German car factory imported car parts from the USA at the same unit price to help manufacture its cars in Germany, the VAT payments and receipts flow would be the same. Therefore, the US exporter is not being charged in any different way to domestic German suppliers.
So, as far as VAT is concerned, the US exporter are not at any competitive disadvantage to German domestic suppliers.
I think you miss the point. It’s not solely about VAT. It’s about how the tax take for a country is split between a sales tax on consumers and taxes on manufacturers. I don’t know how that actually breaks down, and therefore how significant it is, if at all. But, like many things with Trump, there is likely to be something behind what he says.
VAT isn’t a tax on manufacturers. It’s a tax at the point of sale (or service) paid by the purchaser/importer. That purchaser/importer, if VAT registered, will reclaim that VAT paid (or invoiced) but will then add VAT onto its subsequent sale, until the end user – if a member of the public – pays it as an add-on to the net price.
It would be very easy for a politician to look at a shipping document which sets out the customs duties and VAT at the point of entry and assume that VAT is just another tariff. It isn’t. Sadly I think that Starmer and Mandelson and Lammy, like 99% of the UK population, don’t understand how VAT actually works.
Before this latest story broke, UK (or EU) exporters to the US didn’t say to the US, “Hey, if our goods are sold in, say, Arkansas, they apply a sales taxes of 9.5% on our products. That’s a tariff and isn’t fair!”
VAT is a red herring in tariff discussions.
The German article is pretty rambling and actually mostly about China. It sort-of only mentions the usual grievance of US-based megacorps that countries which are not part of the USA have all kinds of different standards for stuff – How dare they! – and that they need to comply with them if they want to sell their products there. And then, of course, gene-manipulated foodstuffs, chlorinated chicken and all the usual stuff. Even the huge US navy gets a mentioned favourably as if it somehow wasn’t an instrument of global US politics/ dominance but a benefit the USA donated to the world which simply couldn’t do without it.
Oh dear another snarl from the anti American sentiment. The prosperity Americans have enjoyed since the 50’s shows no sign of flagging. Quite the opposite. The majority of Brits and Europeans have never even come close. If you are willing to work in the us you will prosper, if not you will live like all other places, in poverty.
The new US Government is also denouncing the EU’s import VAT. The intricacies of tax law are confusing, but considered in the abstract, Donald Trump’s complaints are not far-fetched:the result of the VAT is to directly place a burden on the consumption of end users… “
That is not the argument those in the US use where how VAT works is not understood – even when patiently explained.
They see VAT on imported goods as a tariff which is not paid if goods are purchased from a domestic producer – not true – and do not understand that VAT is paid on all purchases by a seller, not just on goods, and that VAT paid out is offset by VAT collected when a sale is made.
The net effect is that VAT paid on import does not make US imports more expensive or less competitive than a UK produced product.
” if there were only income taxes in one country and only taxes on consumption in another, exporters from the first to the second country would be double-taxed,”
Eh?
Except the net effect of VAT is revenue neutral. Income tax + VAT = Income tax alone, or consumption tax alone.
It very complex. Even in the EU it seems to be a problem. A product purchased online has to be taxed for VAT on the country of consumption. So if an online purchase is made say from Germany, the German VAT is deducted and the country of consumption VAT is added. So great for big companies but a nightmare for small ones.
so if you buy something say from Amazon, which is dealt with by Amazon the VAT will be adjusted automatically. But sometimes it seems to prevent small companies selling outside their country, even within the EU. So it’s not truly a single market!
Thanks for that “clear” explanation.
Then of course there are the non tariff trade barriers. Big corporations have systems in place to automate the process. The poor old consumer has to jump through hoops to purchase something from outside the EU. Even from the UK where there is a trade agreement it can takes considerable amount of time to fill out the paperwork, this will cost about £10 per delivery for the post office or courier to clear customs. If you try clearing yourself the whole process takes forever. Obviously consumers and small companies suffer the most.
I had a conversation with a courier, complaining that they were asking me too many questions. The man said it’s much worse than you think and that he was making it easy. £10 down the bureaucratic drain.
Children should learn about the basic history of the EU at school. I was vaguely aware that there was something called a ‘customs union’, which sounds nice and filled with togetherness. Then I took a module on what that means and how it came about, and I realised the EU is a protectionist clique.
Now I translate and interpret for companies that want to do business with EU countries, and I see them growing increasingly worn down by the faff and cost of compliance, not to import hazardous chemicals or something, but just to sell us basic everyday items.
Our VAT rate has been as low as 8 percent. Now 20 percent because someone has to pay for all the spongers and hotel guests. I’m always surprised that a luxury good, Gold, does not attract VAT.
The EU was always about free trade within the ‘zone’ and closing opportunity from without. As a car importer I was aware we/the EU paid 10% duty on US imports of cars (and 20%plus of trucks) whereas on EU vehicles imported into the USA there is no duty.
As regards imports of any branded goods of any sort, including cars, from anywhere outside of the EU you have no rights to the trade mark or copyright of that product and are committing a crime by importing and selling the produce without the express permission of the IP owners (which as a grey market importer you will never get).
Always a pleasure to read a balanced article about tariffs. Thank you to the authour and translator.
Mr Alberts is right about tariffs, of course.
He is not right about VAT.
VAT is a tax on “value added”, not on consumption. The US State consumption taxes are instead sales taxes.
This is why we have the ghastly VAT bureaucracy, with companies levying VAT on their sales but claiming back their input VAT.
Sales Tax vs. VAT – What’s the Difference? | This vs. That
More importantly for the purposes of this article: these taxes are paid to the governments who levy them, by their own citizens.
In his “ideal-typical exaggeration” example, the consumers in the second country (the one with only consumption taxes) would pay tax on both imported and domestically-produced goods and services, and they would pay that tax to the government of that second country. So no distortion in favour of domestic goods.
The income-taxpayers of the first country (the one with only income taxes) would pay tax on their income to their own government, before having their income available to spend on goods and services, whether imported or domestically-produced. So again, no distortion in favour of imported goods.