Monday, June 11, 2018

So Why Can't Germany be Competitive, Without Tariffs?

While the intellectual folks and politicians work hard to dump on the US some point, some of the smarter people usually get around to German tariffs that exist.  You know.....the ones that have existed for more than ten years.....some more than twenty years.....some even longer than thirty years.

Shocker?  Well...ask the German commerce folks about those tariffs. 

The necessity for the tariffs?

German companies are capable of manufacturing just about anything you can dream up.  However, once you establish the raw material cost, the labor cost, the health-care cost, the company taxation, the VAT, the cost of living.....then you come to 'X'.  The problem is....this same product could be made in Malaysia for 19-percent less than 'X'.  It might even be made for 4-percent less than 'X' in the US.  Then count in the dollar to the Euro exchange rate.....which is NOT one dollar to one Euro.  The rate is presently around 1.2 dollars to buy one Euro. 

The tax business? the personal level, you have an income tax, a gasoline tax, a property tax, a dog tax, a VAT tax, a car registration tax, and so on.  So your 180 folks who work for your company.....have to be paid a wage that makes sense and helps to to survive.  Then your company has a tax as well.  And if the product is sold in Germany, there's a 19-percent VAT on the item.  So you can figure around 40-percent of the cost of the item.....goes back to some type of tax.

The blunt fact is.....with this extra tax weight and the cost of living.....a German company can't be competitive unless other competitors coming into Germany are stuck on a tariff. 

So all that free stuff that the German is hyped up about and wants more of.....which relates back to taxes in some way.....has a counter-weight on competition.  If you got rid of the tariff.....German companies would be forced to either relocate (out of Germany), to demand tax cuts by the government, or just fold up.

Pretty sour news, if you think about it.

So Merkel and the squad are stuck.  They really can't sit down with Trump and discuss this tariff business because they are chained to a machine that cannot function without high taxation.  If Trump wins?  I'll let you ask that question.....think over it.....and come to a rational conclusion, and it's not a pretty image. 

And if this tariff war continues on, with the US playing this as well?  This puts the German product into a lesser sales category (maybe months later....maybe even three years later).  So he's hurting them in the long-run. 

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