[rayiner]

And also think about which industries and constituencies are helped by the U.S. having the reserve currency, and which ones are hurt by that.

What would it take for America to have more of a German-style economy than the current American one? Who would that hurt and who would that help?

[psychlops]

I could be wrong, but think the German economy just broke last week when they blew the cap off their debt ceiling and kicked current day payments to future generations. Note that Germany protects its production with tariffs and VATs, the rough average I've found is 19-21%.

I think China is the one to watch. They have double the energy output of the US and are basically the production capital of the world for the foreseeable future unless something changes.

[xyzzyz]

Germany doesn't protect its production with tariffs any more than, say, North Carolina does. There are no German tariffs, because Germany is part of European Union, which sets up common, shared tariff regime, and tariff-free goods movement within EU. Germany can lobby within EU to propose tariffs that it considers beneficial to it, just like North Carolina can in US, but if other EU members don't like it enough, it will not go through.

Second, how does VAT protect domestic production? VAT applies to both imported and domestically manufactured goods equally. VAT is really ultimately just a sales tax, just collected in a somewhat different way, and you pay the same sales tax regardless of where the good was produced.

[psychlops]

Thank you for clarifying, it did not occur to me that member states paid VATs. From outside the EU, the VAT is no different than a tariff. They are both taxes which inflate the cost to do business. From your example, I think it's fair to sum the state taxes into US tariffs for comparison.

You did send me down a research rabbit hole trying to better understand VAT. It's complex so I picked a car as a test product. As a comparison, I found that to import a car from Germany into the US it costs 2.5% of the cars value. North Carolina charges an additional 3% state tax on it for a grand total of 5.5%.

To import the same German car into France the cost is (cough) 20%.

To import an American car into France the same 20% is paid plus a 10% import fee for a total of 30%. I'm sure I'm glazing over many, many smaller charges/exemptions in these examples.

To answer your question about protection using the numbers above, companies outside the eu that want to compete at an equal price with an equivalent German car would need to do so with a product that is at least 10% cheaper.

[xyzzyz]

To import the same German car into France the cost is (cough) 20%.

No, the cost to import is 0%. The 20% VAT you are talking about here applies equally, regardless of whether the car is imported, or (cough) French. Again, VAT is just a kind of sales tax, and you pay sales tax for all goods, imported and domestic.

To import an American car into France the same 20% is paid plus a 10% import fee for a total of 30%.

No. Importing an American car to EU is 10%, regardless of which country you import it to, and then it's 0% to move it between EU countries. As I repeatedly said, you pay 20% VAT on any car, imported or not. Often, you actually pay additional registration taxes on top of that. For example, to import a car to Poland, on top of 10% EU customs duty and 23% Polish VAT, on a car with engine over 2000cc, you'll pay additional 18.6% excise tax upon registration. So, a $25k Chevrolet Malibu imported from US will cost $38k to buy in Poland.

To answer your question about protection using the numbers above, companies outside the eu that want to compete at an equal price with an equivalent German car would need to do so with a product that is at least 10% cheaper.

Yes, EU does apply protectionist tariffs, but my point is that they are not German tariffs, they're EU-wide. Germany might benefit from these more than countries without car industries, but most large EU countries have substantial car industry. For example, Poland exports $40B of vehicles and vehicle parts each year.

[rayiner]

Why is importing an american car into the EU 10% but importing a car into the U.S. is 2.5%?

[xyzzyz]

I have no idea, and I'm not even able to tell whether it's a good thing or a bad thing, and to whom.