Politics

PHOENIX PHIL said:

A fair number of NATO allies.

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mdwest said:

We are in agreement....

That said, the remaining 8 countries (that's a full 25% of NATO.. that's not a small number at all).. are among those doing the most bitching and complaining about the US saying "if you don't meet your commitments, we don't have an obligation to meet ours"..

Canada for example is only contributing 1.38% and doesn't have a plan to get to 2% until sometime between 2032 and 2033..

Spain is currently at 1.28%... they say they will try to get to 2% by 2029.. but had no intention of honoring their 2024 commitment at all until pressure has been applied over the last few months..

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Wheels said:

I was confused initially at your post then realized you are quoting my post from 6+ years ago. Trump had been in office for 2.5 years and the negotiations had been ongoing between Navarro/Lighthizer and Freeland.

Regarding your last sentence, "What do you call someone who signs a deal and then refuses to stand by it". There are more deals than just USMCA which I presume you are speaking to. Why don't you ask your government?

America has asked Canada to:

1. Stop the flow of illegals and drugs from entering America.

2. Stop the flow of Chinese goods which violate USMCA.

3. Open Canada to American banks.

4. Live up to NATO spending agreements.

So far Canada hasn't done any of these things other than to pay lip service. On the other hand Mexico seems to be working hard to remedy the issues that affect them. Things seem to be going much better for Mexico than Canada.

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Opposite Pole said:

Yes, and I’m all for these countries to face consequences of their actions. However, the current narrative of the US administration and large parts of ill informed US population is that most all NATO members fail their obligations when the opposite is true.

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RLD said:

This is actually an interesting issue if you think about it for a couple of minutes. America is the consuming nation where all the money is. It kind of begs the question:

Why don't foreign companies build their plants there in the first place? Why did Honda and Toyota build plants in Ontario and not just over the border in say...Michigan?

Here are some of the reasons.

1) A better educated more productive workforce. One of the reasons the Mercedes-Chrysler merger fell apart was due to the inefficiency of American workers who were unable or unwilling to meet the German standards. For instance, the German Union contracts required their workers to move almost three times as many parts as the Chrysler workers CBA's required them to move. American workers have the potential to be as productive as anyone else but are not.

2) Health care costs. If you are building a big plant in the U.S. and have to buy health care insurance for your many thousands of employees, it can get very expensive. Base health care in Canada is provided by the government and thus not a cost. American health care is very expensive.

3) Cheaper energy costs. Which is the main reason the U.S. can't build aluminum that cheaply. Energy cost is a huge part of aluminum production.

4) Lower corporate taxes.

So how about this for an idea. American governments work to create an environment that makes it attractive and desirable to produce products there. Rather than simply trying to bully people into doing it, make it the best choice.

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mdwest said:

You need to do some more research... you clearly know nothing at all about the automotive industry or how it works..

MANY foreign companies build their plants in the US...

You used Honda and Toyota as examples...

Well.. lets see... 100% of Toyota Tundras sold in the US are built in the US.. in fact there are 11 Toyota manufacturing plants in the US.. they are located in Kentucky, Indiana, Tennessee and Texas, among others

Honda has 12 automotive manufacturing plants in the US.. they are located across the country but are in Ohio, Alabama, and Indiana primarily..

You claim American workers are unwilling to meet German standards... really? Then why is one of Volkswagens largest manufacturing facilities in the world located in Chattanooga Tennessee? BMW and Mercedes also have manufacturing facilities in the US..

Hell, Volvo, Nissan, Mercedes, Kia, Hyundai, and just about every other major manufacturer of vehicles in the world manufacturers in the US...

And all of the major US manufacturers build cars at multiple locations overseas as well.. Ford has a huge plant in South Africa where they make Ranger trucks for the South African market (among many other places)... GM makes vehicles in 8 different countries around the world.. Chrysler has plants in China, South America, and in Europe..

The reason plants were built in Ontario vs Michigan has exactly zero to do with any of your 4 points..

The primary reason Michigan has died as an auto manufacturing hub has to do with unionized labor and liberal politicians..

The US auto industry moved out of Michigan decades ago.. no auto manufacturing plants have been built in Michigan in over 30 years.. US companies started moving to more corporate friendly states like Tennessee, Texas, Ohio, Alabama, etc and out of Michigan.. and the Japanese and European companies followed the US car companies lead..

Mack (Mack Trucks) opened an engine plant in Detroit in 2021.. it was literally the first new plant in more than 3 decades in that state.. they are testing the waters to see if Michigan has learned its lesson I suppose.. time will tell...

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RLD said:

1. The amount of illegals and drugs entering from Canada is minuscule….


How about this though. The vast majority of gun crime committed in Canada is committed with guns brought in illegally from the U.S. Would you mind doing something about that?

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PHOENIX PHIL said:

Honda, Toyota and at least BMW have factories in the USA. Likely more, but I know those do off the top of my head.

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rigbymauser said:

Some time ago there was a discussion why american were working harder and longer. This was I believe compared to to a German Mercedesworker(skilled) who worked 37 hours a week and an american skilled worker worked 40 hours a week. The germans have 5 weeks paid vacation the american have none or up to a few weeks but only after a some years in the company. The german worker delivered higher output and higher quality and making higher profit for the company. Its all about mindset. Just wait when all this is put into warproduction.

Btw. If one wants a good factory made rifle, car, watch, hq ammo, optics etc its still a product from Germany, Swiss, Sweden or Finland.

What I saw in the US was lots of americans who as financially well of didn`t buy their own american made stuff....no they bought foreign stuff.

For your infomation my country Denmark employes over 180000s americans in the US through danish owned companies.

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Red Leg said:

That is not exactly correct. As @Alistair notes, VAT is a consumption and not a production cost. It has no affect on the exported cost of the vehicle. The Polish citizen does not have the option to purchase the vehicle in the States. Thus, any vehicle with a $50K production cost will have the same VAT applied regardless of location of production. The tariff or duty differential would affect relative costs.

For example, take a $100 US-made gadget:

• Shipping and insurance: $20.
• Import duty (say 3%): $3 on the $100 value.
• Total taxable value: $123.
• VAT at 20% (e.g., UK rate): $24.60.
• Final cost to the European buyer: $147.60.

And a $100 EU-made item (pre-VAT):

• In Europe, with 20% VAT, it would cost $120 domestically.
• Shipping and insurance $20
• When exported to the US, VAT is removed, so the base price to the US buyer is $120.
• Import duty in the US (say 2% on the $100 value): $2.
• Cost before sales tax: $122.
• US state sales tax at 8% (e.g., a typical rate in states like California): $9.76
• Final cost to the US buyer: $131.76.

Yes, an equal production cost EU product may be cheaper in the US than it is in the EU, but that is a function of relative consumer costs. Again, as @Alistair VAT plays only a marginal role in determining the trade deficit.

The real drivers of trade deficits are larger forces: exchange rates, production costs, consumer demand, and trade policies. For instance, the US runs a persistent trade deficit (e.g., $947 billion in 2022) not because of VAT but due to high domestic consumption and reliance on cheaper foreign goods (e.g., from China, where VAT is 13% but labor costs are low). Government subsidies (the Airbus debate) is a different issue entirely.

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Alistair said:

That's clearly wrong.

In your example, the 7.5% delta is valid, but vat clearly and evidently has no impact.

The US company isn't paying vat, the Polish consumer is. They have to do so no matter if they buy an American car, or a Polish car, or a German car, so it's not barrier to US trade as it does not represent a competitive disadvantage to the US supplier over the Polish one. It simply means that Polish consumers pay more for ANY car.

Any more than a 5% us sales tax is somehow driving US consumers into an American car over a Polish one. That's clearly not going to be the case.

I'd also note that if your argument is that vat nominally results in a skewed balance of trade because the US car nominally becomes a more expensive export vs the Polish import coming into the US, then you should be aware that vat is not accounted for in trade deficit as it is charged at the point of sale, not at the point of disembarkation, so again, your argument is flawed.

Tariffs and duties on imports you have an argument. Sales taxes, be they vat or us sales tax, you do not.

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Red Leg said:

That is not exactly correct. As @Alistair notes, VAT is a consumption and not a production cost. It has no affect on the exported cost of the vehicle. The Polish citizen does not have the option to purchase the vehicle in the States. Thus, any vehicle with a $50K production cost will have the same VAT applied regardless of location of production. The tariff or duty differential would affect relative costs.

For example, take a $100 US-made gadget:

• Shipping and insurance: $20.
• Import duty (say 3%): $3 on the $100 value.
• Total taxable value: $123.
• VAT at 20% (e.g., UK rate): $24.60.
• Final cost to the European buyer: $147.60.

And a $100 EU-made item (pre-VAT):

• In Europe, with 20% VAT, it would cost $120 domestically.
• Shipping and insurance $20
• When exported to the US, VAT is removed, so the base price to the US buyer is $120.
• Import duty in the US (say 2% on the $100 value): $2.
• Cost before sales tax: $122.
• US state sales tax at 8% (e.g., a typical rate in states like California): $9.76
• Final cost to the US buyer: $131.76.

Yes, an equal production cost EU product may be cheaper in the US than it is in the EU, but that is a function of relative consumer costs. Again, as @Alistair VAT plays only a marginal role in determining the trade deficit.

The real drivers of trade deficits are larger forces: exchange rates, production costs, consumer demand, and trade policies. For instance, the US runs a persistent trade deficit (e.g., $947 billion in 2022) not because of VAT but due to high domestic consumption and reliance on cheaper foreign goods (e.g., from China, where VAT is 13% but labor costs are low). Government subsidies (the Airbus debate) is a different issue entirely.

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rigbymauser said:

What I saw in the US was lots of americans who as financially well of didn`t buy their own american made stuff....no they bought foreign stuff.

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RLD said:

How about this though. The vast majority of gun crime committed in Canada is committed with guns brought in illegally from the U.S.

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Wheels said:

Ultimately the consumer pays all taxes whether directly in the case of VAT or indirectly in the case of tariffs. They amount to the exact same thing. Income to the government coffers. The two are conflated. It just depends on how the government chooses to collect.

It is easy to get into the minutia when talking tariffs because most countries have hundreds and to balance them out in a simplified manner is difficult. Some governments subsidize certain industries some governments protect certain industries. In some cases VAT is added at every step of a process, in some cases only on the final product. America calls VAT a sales tax. My town charges 8.25%. Personally I prefer a VAT over an income tax because I get to choose what tax I want to pay.

I agree with you that VAT has not historically been figured into the balance of trade, right or wrong. Tariffs and VAT equal the same thing. Income for the country charging them. Tariffs and VAT also are a barrier to entry for the country imposing them.

In the Poland/America illustration above. An American car in Poland costs $67k including Polish government taxes of 16k in one form or another while a Polish car in America costs $51k including American government taxes in America. What America is now doing is adding an additional $16k of government taxes in the form of tariffs on the Polish car to balance the trade.

Again, if Poland doesn't want to pay the tax, all they have to do is build their factory in America.

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RLD said:

1. The amount of illegals and drugs entering from Canada is miniscule.

2. This is nonsensical. If there are goods you say should not be in your country stop them from entering. Since when is that someone else's job?

3. Canada is open to American banks.

4. We spend way too little on our military. But that is not a trade issue.

How about this though. The vast majority of gun crime committed in Canada is committed with guns brought in illegally from the U.S. Would you mind doing something about that?

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Wheels said:

Ultimately the consumer pays all taxes whether directly in the case of VAT or indirectly in the case of tariffs. They amount to the exact same thing. Income to the government coffers. The two are conflated. It just depends on how the government chooses to collect.

It is easy to get into the minutia when talking tariffs because most countries have hundreds and to balance them out in a simplified manner is difficult. Some governments subsidize certain industries some governments protect certain industries. In some cases VAT is added at every step of a process, in some cases only on the final product. America calls VAT a sales tax. My town charges 8.25%. Personally I prefer a VAT over an income tax because I get to choose what tax I want to pay.

I agree with you that VAT has not historically been figured into the balance of trade, right or wrong. Tariffs and VAT equal the same thing. Income for the country charging them. Tariffs and VAT also are a barrier to entry for the country imposing them.

In the Poland/America illustration above. An American car in Poland costs $67k including Polish government taxes of 16k in one form or another while a Polish car in America costs $51k including American government taxes in America. What America is now doing is adding an additional $16k of government taxes in the form of tariffs on the Polish car to balance the trade.

Again, if Poland doesn't want to pay the tax, all they have to do is build their factory in America.

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Alistair said:

It doesnt have to be complicated. You have universal taxes on all goods, and targeted taxes on specific goods, or goods from specific places. Simple enough.

A VAT is applied to all products, foreign and domestic, and hence is not a barrier to trade at all. If all goods from all places are more expensive, then no one is losing, except of course the local consumer. Its just simple tax burden. Europe loves that, although I'd agree with you that given the choice of sales tax or income tax, I find sales taxes more equitable and prefer them. Obviously theyre not as good at stimulating the economy though.

A tariff however is different because it is selective. Trump increasing sales tax on all cars doesn't make American cars artificially competitive. A tariff on foreign cars does.

What is the same in both cases is who pays for the reduction in competiton. It's certainly not manufacturers. It's American consumers. Yet he has the cheek to claim to be working to reduce inflation. Gotta laugh.

As for if foreign companies should build US factories? Maybe. Some already do. Theres some advantages in short supply chains, reduced import cost, advertizing advantage. Enough that some consider it advantageous.

But most manufacturers don't because they can make the same product cheaper elsewhere and offer a better value proposition to the consumer as a result. A free market doesn't support it.

You can force them to do so using tariffs, but at an ultimate cost to the consumer of more expensive goods. Maybe the price hike is passing on tariffs. Maybe the price hike is passing on high us wages, high us regulatory burden, and repayment of capital investment. US consumers get screwed either way.

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Opposite Pole said:

I’m afraid you got it wrong again. VAT is not a barrier to entry. Why? Because it is applied to the local product in the exact same way as an imported one. Tariffs are a different story. If, as per your example America added the exact same percentage tax on the local produce and evened out the import duties that would be tit for tat. It is not minutia, it is facts. If there are differences in import duties on the same goods between USA and EU they should be evened out. That is my opinion. Fair trade is fair trade. I’m a business owner and have been for most my adult life. I’ve always had competition, didn’t always like it but when the field is even it’s really not a bad thing even if undesirable from the particular business’ perspective.

The following doesn’t belong in this thread (or this forum really) but one of the reasons American cars don’t sell well in Europe is that most of them are not offered for sale here. It was only few years ago that Mustang started to be officially sold in Europe. After decades of car enthusiasts wishing for it. In it’s class it became an instant hit. It offered a a lot of value and character for the money. I myself wanted to buy a F150 Raptor. But I couldn’t because they are not sold here. Grey import is fine for enthusiasts looking for an interesting item but not for people looking for an everyday vehicle. With no manufacturer supported sales network there is no reasonable access to consumable parts, warranty service, or crash repair. As such insurance rates go through the roof. Lack of parts is a real pita. Ever tried to get something as simple as brake pads for a vehicle that has never been sold in your country? Takes all the fun out of driving knowing that the next service will require hours of trying to source various bits and pieces on another continent, find someone willing to ship it to you, get it through the customs and pay the silly bill for it at the end.

Granted, I might not be the regular car buyer in EU but get the US car industry to sell some of it’s interesting cars over here and I hereby commit to buy 2-3 of them within 18 months of the beginning of offical distribution.

How is that? A European publicly committing to support US manufacturing ;-)

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Wheels said:

Trump's primary goal with tariffs is to bring manufacturing back to America and help build back the middle class which has been gutted the past 40 years. Since Trump took office there has been a commitment of apx. $3T in new investment. This will obviously take years to play out but seems to be a good start.

This will be difficult for many companies and countries. Long term, investing in America will be the only option to avoid tariffs if they want the American market.

https://www.streetinsider.com/Investing/Investment+commitments+in+U.S.+nears+%243+trillion+since+Trump+took+office/24538801.html

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