Tariffs vs VAT

175 of the 193 countries in the United Nations have value added taxes (VAT) but the US does not. The average in the European Union is 20% and in China 13%. If Google AI is asked what are the tariffs in different countries, the VAT is not included. It would report that the US tariff on EU goods is 3% and the EU tariff on US goods is 4%. This is misleading. For example, up to a little more than one year ago, the tax on a US car going to Germany was 10% tariff and 19% VAT, while a German car coming to the US was taxed at 2.5%. Recent news about Trump negotiating with the EU regarding tariffs says that both countries now employ a 15% tariff. They do not mention that the VAT is still in force like it has been since the 1960’s. This means that fewer US cars will be going to Germany and many more German cars being made in the US. The most efficient way for international trade is to have zero tariffs and VATS. This would be free and fair trade and the US would be satisfied with such an arrangement but other countries would not. Import/export taxes have put the US at a disadvantage for years but that is changing and it will result in more foreign cars being made in the US. In 2024, the United States exported approximately 169,000 to 170,000 new vehicles to the European Union, a significantly lower number than the roughly 750,000 cars imported from the EU to the US, highlighting a major trade imbalance favoring European manufacturers, according to ACEA data