Trade

European countries have a value added tax (VAT) that varies from 17% to 27%. This means that imports from the US will pay a VAT in addition to the import tax (tariff). The US charges only 2.5% tariff and has no VAT. The result is that most foreign cars sold in the US are made in the US. The result is that in 2024 five million foreign cars sold in America were made in America. In contrast only 750,000 were made outside of America and sold in America in 2024. Note that in 2024 only 169,000 American made cars were sold in Europe. Americans who travel in Europe often remark that there are no American cars. The same situation happens with many other products including electronics, appliances, clothing and pharmaceuticals. As America transitions to made in America there will be shortages but in the long term it will mean good American jobs. This will also mean higher prices but higher wages. This was the situation in the 1950’s when wages increased 6% and inflation was held to 2%. Each year workers had a little more disposable income.