[lalaland1125]

You have a lot of words here, but it still seems like the VAT is irrelevant here as it applies equally to both domestic and foreign production.

I agree the 10% tariff on US cars that is problematic, but that has nothing to do with the VAT

[bitshiftfaced]

I'll try to summarize it for you. My first point was that with from the EU buyer's perspective, the German car can be delivered a bit cheaper because VAT is totally removed from it up until the end. The US car entering the EU market might have has sales tax embedded into the cost due to the differences in the tax systems.

To illustrate my second point, let's imagine both countries have a 10% tariff, and it takes $50,000 to build a car (ignoring point #1). In Germany, the German car's after tax cost is 50000*1.19=59500 and the US car's is 50000*1.1*1.19. The difference between the two cars in the German market is 5950.

In the US market, taking the average sales tax, the German car's after tax cost is 50000*1.1*1.085=59675 and the US built car is 54250, a difference of 5425. The difference between the cars is $525 tighter in the US market compared to the EU market. The German car makers get an advantage by virtue of how VAT is systemically higher and the resulting multiplicative effect, even when the tariffs are the same. When the EU tariffs are relatively higher, as they are now, the effect is even greater.