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Bob Lutz Sounds Off On Germany’s Trade Problem

Last month, President Donald Trump made an unusual comment after his first trip abroad since taking office.  He told a German newspaper the “Germans are bad, very bad” when it comes to trade and called for an end to German car sales in the United States.

White House economic adviser, Gary Cohn, confirmed the statement but clarified that President Trump was only referencing the country’s trade policy. Following the comment, the media was flurried asking why the president would say such a thing.

Former General Motors executive, Bob Lutz, penned a rebuttal to the controversy with Automotive News and explains why the president got it right, but maybe didn’t deliver the message in the right way.

The problem, according to Lutz, is Germany’s tariffs and taxes. Germany levies a 19 percent value added tax (VAT) and the European Union raises a 10 percent tax on imported cars. It’s one of the reasons automakers are so worried about Brexit and what it could mean for European auto production.

When a German vehicle is exported to the United States, the automaker does not pay a VAT but pays a light 2.5 percent duty rate and any other state sales tax that applies. Meanwhile, a car shipped from the U.S. and brought into Germany already carries a U.S. tax load. Therefore, it’s essentially taxed twice and vehicles exported from the U.S. to Germany are more expensive.

“This is what the president means, and he is NOT wrong. This has been going on for decades, and I’ve been telling it for decades, but nobody has wanted to listen,” Lutz writes. “Until now.”

Editor’s note: GM Authority encourages participation and an open dialogue, but will not tolerate political bashing and derogatory comments. Please, keep it civil. Admins are monitoring.

Former GM Authority staff writer.

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Comments

  1. Isn’t it funny how people try to explain or make excuses for what the Idiot in Chief says. Trump has no idea WTF he is talking about then experts interpret what he meant to say. Trust me, take Trump for what he says word by word because that is what he means. Trump on Twitter is the real Trump, meanwhile a prepared statement he reads is not him. Yes, the trade deal sucks as far as taxes go but if the people willing to buy the car regardless of the unknown to them taxes, then that is their decision. What this article as well as Trump said do not say is many of these automakers make the car in the country to avoid that tax in the first place. Most German, Japanese, Korean, etc… automakers manufacture their popular cars here in the USA.

    Reply
    1. Wow, so your a more informed expert on foreign trade than an international businessman who has killed it across the world. Maybe you should apply for a job in international trade. You could make a killing with your vast knowledge of geopolitical economics. NOT.

      Reply
    2. Assemble some us parts here not manufacture. All the high profit parts are shipped from abroad.
      Germans and Japanese.

      Reply
      1. The reality is that most are from China. Most people would be shocked to know how high it is. And the Chinese are buying suppliers in a major way.

        Reply
  2. Germany’s trade surplus with the U.S. is around $65 billion per year, and around $200 billion with the World. Prior to the launch of the Euro currency, Germany’s world trade surplus averaged $40 billion per year in the 1990’s, which is a 500% increase.

    Moving from the strong German Mark to the ever weak Euro was the best thing to happen to the German economy.

    Reply
  3. I’ve read Lutz’s criticisms of this President, and I have agreed with Lutz each time. This time…

    I agree with Lutz again, which means I agree with Trump. This trade deal needs change, and America needs to win. I’m still a Sanders supporter, and I think Sanders would be saying the same thing if he was Prez today.

    Reply
    1. The issue is not Germany, it’s the US taxation system which must be changed.

      Calling Germany “very bad”, shows limited language skills and how moronic he really is.

      Reply
  4. Allow me to expand this discussion to Trump’s abandoning the Paris Climate Accord. I was disappointed that the President did not point out that America has been at the forefront of emission controls since the early 1970s and when manufacturers step out of line, they face penalties.

    Trump could so easily ask why have such have an accord when Volkswagen blatantly cheats and no senior executive has been held to account, fined or thrown in jail. The US has gained compensation for VW owners, but Europe does nothing. Why formulate climate rules when existing ones are not enforced even for blatant fraudulent contraventions?

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    1. Reply
      1. I stand by my statement. Two small German city lawsuits are simply an irritant, while federal authorities remain silent. Countries outside Germany may be taking action, but senior executives are not being prosecuted from within Germany.

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  5. Why blame the Germans. it’s the United States politburo that won’t raise taxes on imports. They have no restraint when to comes to raising taxes on Americans.

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    1. Exactly!

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  6. Donald Trump needs to end the battle of words and simply impose taxes on all German imports to the same level as German does with American made cars exported to Germany as it’ll give Angela Merkel reason why Germany won’t fulfill their country’s obligation in defense spending.

    Reply
    1. The president does not have the authority to impose taxes. That’s the job of the politburo.

      Reply
  7. Sorry to say, but this time Bob Lutz is talking nonsense.

    a) The sales tax applies to all commodities being sold in either country, be it imported or produced locally, so there is a level playing field for all products.

    b) In Germany, and I guess all over the EU, businesses have to announce the prices of their products for consumers including the VAT, while in the US the consumer is being told a price which later comes with the surprise increase of a sales tax.

    So the Opel Insignia Country tourer which costs according to the GMauthority news 34,884 Euro to the consumer costs net 29,315 Euro net in pure figures about the same as its twin Buick Regal Tour X announced by GMauthority costing 29,995 USD. This Buick is a car imported from Germany, costing less in the USA then in its country of origin, even less when calculating with the current exchange rate of 1.14372 USD/EUR which gives a net price of the car in Germany as 33,525.96 USD. This is without taking in account any import tariffs.

    c) When Mr. Trump and Bob Lutz with him complain about the difference of an US import duty of 2.5% to the EU import duty of 10% (I don’t know if that is the full truth of the matter), why then did Mr. Trump cancel the negotiations of the TTIP which was intended to create a free trade zone including the EU and the USA? BTW, I always thought that the TTIP was rather intended to re-establish the supremacy of US industry over the European, following the model of NATO.

    d) Somebody else already raised the question: if it is bad that EU has import tariffs of 10% and the US of only 2.5% — why does the US not raise its rate, or negociates a common rate of both sides of the Atlantic?

    The answer is simple: the USA consumes much, but does not produce much. The USA pays the world for the products delivered to the USA with the money which those other countries place in the US speculative financial markets, so actually the USA sucks the world.

    e) Still before his inauguration, Mr. Trump proved his ignorance of this world’s reality when he complained to a Hamburg newspaper that he does not see any US cars like Chevrolet in German streets. Well, the US autombile trusts do produce locally in Europe and thus have a big market share (sure, GM is following Chrysler’s example who sold their European business to Peugeot in 1978).

    f) Question for a champion: Which automobile manufacturer in the USA exports more cars out of the USA then all others? The first correct answer gets a big applause.

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    1. Bayerische Motoren Werke AG.

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      1. Applause! Applause!

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    2. BMW followed by Mercedes.

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      1. One more applause!

        Mercedes second? I have not yet heard that. The first place being occupied by BMW could be read in so many places and serious newspapers so that I believed it.

        Regarding Mercedes I would like to see a statistical source for that.

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        1. BMW is the largest exporter as has been confirmed by many sources lately but Mercedes is a guess. They both build almost all their SUVs in the US and both brands have similar production volumes.

          Since both brands produce higher end vehicles, it would be interesting to also look at unit volume and also the total value of exports in dollars compared to other brands.

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    3. A comment on my points C) and D) above, especially regarding TTIP (Transatlantic Trade and Investment Partnership) — why refuse TTIP which would have really removed such inegalities?

      The answer is simply and POTUS Trump has demonstrated it in all international meetings and in his Twitter-posts: while previous US government had acted as the leader of the “West” i.e. the former and still acting colonial powers by dragging them along in the pursuit of US interests, Trump is switching to bullying those former allies.

      But the decline of the US Empire is inevitable. Nothing is permanent in this world, the only stable element in history being permanent change.

      Trump’s bullying can draw this world into the 3rd world war, which would probably end the existence of humans on this planet, and maybe of any life on it at all.

      Reply
  8. Well it’s time for me to go to work now. Let me fire up my American made Detroit diesel engine. And get my American-made Freightliner on the highway. Both built by Diamler AG.

    Reply

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