The FT has published my letter demolishing the nonsense argument by Jason Cummins and the Trump administration that EU VAT gives European exporters an unfair trade advantage.
Cummins claims that it is unfair that BMW does not pay EU VAT on its exports to the US, whereas General Motors must pay VAT on its exports to the EU.
But BMW cars sold in Europe face exactly the same VAT rate as GM ones exported from the US.
Similarly, BMWs and Cadillacs sold in the US face identical state and local sales taxes, and neither pay EU VAT on their US sales.
Cummins ignores the true lack of reciprocity: that the EU levies a 10 per cent tariff on car imports whereas the US levies 2.5 per cent on cars and 25 per cent on light trucks. Equalising all of those at 2.5 per cent would make sense.
Regrettably, Trump has instead announced a 25 per cent tariff on all car imports from April 3. That is “unfair” and “discriminatory”, not EU VAT.