Getting “Screwed” on Trade?

Back in February, Donald Trump claimed that the European Union was formed to “screw the US” on trade. With the reimposition and then the repausing of tariffs on the European Union, the Trump Administration has repeated that claim, sometimes including that a value-added tax (VAT) also exists to screw Americans. Of course, these are silly claims (see here for an interesting history of the European Union and here for Scott Sumner’s discussion of a VAT. Brian Albrecht also has a great discussion), but they are par for the course of Trump’s victimhood rhetoric. For the sake of argument, let us take the claims as true: the European Union was formed to screw over the US on trade and that VATs do exactly that. How successful has said screwing been?

Answer: not very.

In the New York Times, David Brooks has a data-laden piece that explores the US and European economies. What he finds, citing data from the OECD, The Economist, and political scientist Yascha Mounk, is that the US is extraordinarily wealthier than Europe and that those gains have expanded, not contracted, over time:

“The so-called era of neoliberal globalism has not produced the American carnage that Trump imagines. According to the political scientist Yascha Mounk, in the 1990s and early 2000s, America and Europe were similarly affluent. Today the American economy has left the other rich economies in the dust. American G.D.P. per capita is around $83,000, while Germany’s is around $54,000, France’s is around $45,000, and Italy’s is around $39,000.”

Average wages in Mississippi (the US state with the lowest average wages) are higher than most EU countries as well.

The US smokes Europe in other ways as well. The United States has 1,873 firms valued at over a billion dollars. That’s over 600 more than all of Europe. The United States currently has 96 unicorn startups, roughly five times the number in the European Union. According to the World Bank, the United States is, by far, the highest destination for foreign (and domestic) investment. In 2023, the US had a net investment flow (dollars invested in the country minus dollars invested outside of the country) of $348.8 billion. In other words, investors wanted to invest more in the US than Americans wanted to invest overseas. By contrast, the EU had a net investment flow of -$379.5 billion, meaning Europeans wanted to invest more outside of the EU than foreigners wanted to invest in the EU. When people want to form companies, they come to America, not Europe.

We can go on and on.

Some might argue that there are certain intangible things that make Europe better than the US. Perhaps, but irrelevant here. The claim I am responding to is that Europe is screwing America on trade. If the European Union was formed to screw over America, they are making an absolute hash of it.