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.
READER COMMENTS
Craig
Jun 19 2025 at 3:46pm
You need to start questioning the stats.
Jon Murphy
Jun 19 2025 at 5:05pm
Provide me with alternatives, ideally something well-documented and verifiable, like the data I cited.
Craig
Jun 19 2025 at 5:40pm
Here’s your alternative, summarily reject it and start over. Just saw another one that suggests Puerto Rico is wealthier than Japan. Yeah, ok….for comparative purposes it just isn’t useful at all.
Jon Murphy
Jun 19 2025 at 5:54pm
I mean, if I am to start over, I need a better reason than “some rando on the Internet told me to.” Again, provide me with alternatives, ideally something well-documented and verifiable, like the data I have used.
Craig
Jun 19 2025 at 6:08pm
Its jingoistic bs.
Jon Murphy
Jun 19 2025 at 6:18pm
Again, I need something more substantial than “some rando on the Internet doesn’t like the data” as a reason to reject it. Again, provide me with alternatives, ideally something well-documented and verifiable.
Craig
Jun 19 2025 at 6:38pm
But I’m not the only one, the whole MS/EU (I think it was UK actually and started with an article on WSJ) thing its a ‘thing’ and its generated a fair amount of scholarly comment. And there’s a whole swath of economists with Phds just like you who say its bs.
Jon Murphy
Jun 20 2025 at 7:29am
I agree. Claiming that stats are jingoistic is indeed BS.
For the last time, if you have alternatives, well-documented and verifiable, present them.
Otherwise, it’s time to move on. “Some rando on the Internet doesn’t like data that undermine his preconceptions” is not a sufficient reason to throw out data I’ve verified.
Jon Murphy
Jun 19 2025 at 5:58pm
To wit: I cannot verify your claim that Puerto Rico is wealthier than Japan. The data (World Bank) point in the other direction: that Japan is wealthier than Puerto Rico.
Craig
Jun 19 2025 at 6:13pm
I am seeing World Bank 2023, IMF 2025 and United Nations 2023 with PR in the 36k range and Japan in the 33k range most citing 2023 data. And I don’t care if its close either, because the reality is, they’re not close.
Jon Murphy
Jun 19 2025 at 6:17pm
Oh I see it. Those are nominal numbers. No one looks at nominal numbers (at least, no one who knows what they’re doing).
Craig
Jun 19 2025 at 6:23pm
” 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.”
Those are nominal.
Jon Murphy
Jun 20 2025 at 7:26am
Real, actually.
Warren Platts
Jun 20 2025 at 7:53am
According to the CIA, Germany’s GDP/capita was $72,334 as of 2023. France’s was $63,000. Italy: $60,620.
Jon Murphy
Jun 20 2025 at 9:33am
Again, we’re talking real GDP per capita, not nominal.
Craig
Jun 20 2025 at 11:22am
WP is noting figures from a PPP adjusted. The article’s figures come from charts that are, correctly or. Ot, labelled as ‘nominal’
Jon Murphy
Jun 20 2025 at 11:37am
No he’s not. The link he provides has real GDP per capita at $66k (give or take). In fact, the number he cites doesn’t appear in his link at all. I Googled and found it as a nominal figure.
But again, regardless, the story does not change.
All this nitpicking about numbers that doesn’t change the story is getting really tiresome. Please, either provide useful commentary or reasonable alternatives (ideally well-documented and verifiable).
Craig
Jun 20 2025 at 11:51am
But the 72k figure IS a PPP number notwithstanding WP’s link. I am going to quibble on it because YOU did.
Nevertheless your basic premise is flawed EVEN IF we assume the US is wealthier. When I was subjected to unfair trade practices from China by not being allowed to sell products to willing customers that screwed me. I would’ve been that much wealthier. I’m still FAR wealthier than the average person in China obviously. Their unfair trade practices hurt, potentially 7- MAYBE 8 figure harm. Hard to know because that opportunity is opaque to me, its unseen, it never happened and I lived it…..honestly you have no idea. You CAN’T know, that’s the point, the opportunity was lost.
Jon Murphy
Jun 20 2025 at 12:03pm
No, you and Warren did. Come on, man.
We CAN know. It’s a testable hypothesis. We test it here. If the hypothesis were correct, we’d expect to see Europe getting wealthier than the US. They start at the same place. They diverge, with the US getting wealthier than Europe. We see more companies come to the US. We see investment dollars flow to the US.
The data are there. We can test this hypothesis. You can’t pretend the data aren’t there just becuase they do not tell the story you want. As you have experienced, that is a costly mistake.
Warren Platts
Jun 24 2025 at 3:47am
We see a trade deficit, that’s for sure! 😉
Warren Platts
Jun 20 2025 at 12:25pm
This is wrong at many levels. “Real” GDP is simply the GDP in terms of a year benchmark (FRED likes 2017 lately). Thus 2024 GDP in 2024 dollars is just as “real” as the 2024 nominal GDP. The question is when comparing countries: Should we use PPP or exchange rates? The CIA says PPP is more accurate (consequently, the PRC has a much bigger GDP than USA does). The CIA figures are PPP adjusted. But what makes the figures “real” is that they are reported in 2021 U.S. dollars. I did you the favor of converting the 2021 dollars into 2024 dollars (using the CPI index).
Jon Murphy
Jun 20 2025 at 9:37am
I hasten to add that, even using those numbers, the story stands: the US has only gotten more wealthier than Europe.
Knut P. Heen
Jun 20 2025 at 9:28am
I don’t understand. Do you argue that introducing free-trade within Europe made Europe relatively poorer compared to the United States?
Jon Murphy
Jun 20 2025 at 9:34am
No. Europe is relatively wealthier than they otherwise would be because of the relatively free trade they enjoy. Their problems stem from the insane regulations they have.
Craig
Jun 20 2025 at 11:12am
Actually think Knut has a nexus wkth both the US and EU would love to hear your insight on this ‘poorer than Mississippi’ ‘thing’…..
nobody.really
Jun 20 2025 at 10:12am
Perhaps the term you’re looking for is prostitution.
Jon Murphy
Jun 20 2025 at 10:18am
No. Screwed is the correct term. That’s what the President has claimed. That’s what we’re testing.
Craig
Jun 20 2025 at 12:08pm
The case for free trade is unassailably better. And if they did that, it would be self-evidently better and the idea would prevail. It didn’t, Trump won, why? Well, in part because at least SOME Americans are getting ‘screwed’, enough to have an electoral impact, IRRESPECTIVE of their RELATIVE wealth to the parties screwing them. If I didn’t get screwed, do you think I would’ve voted for Trump? Hell no. But I did and so I’ll take the TCJA and a free house in FL thanks. Why? Because it was done incorrectly. Don’t be shocked when people subjected to unfair trade practices change their tax preferences.
Jon Murphy
Jun 20 2025 at 1:19pm
That some people may, in the short run, be made worse off because of a change in equilibrium (which is all international trade is) is true but trivial and unrelated to the point Trump is making or I am making.
Jon Murphy
Jun 20 2025 at 1:30pm
How is your justification for voting for Trump any different than the Bernie Bros who vote for the Left because they think they’re getting screwed by capitalism since they have to pay for stuff? Seems like both are coming from the same place: misunderstanding the world in which they live.
This is why it’s important to write and talk economics outside the classroom. Economics, like most sciences, is not “self-evident” or obvious. It’s difficult, often counterintuitive. So, it’s my job to make it as simple as possible, so not hide the light under the bushel. It’s my duty not only as a scientist but also as an agent of the State of Louisiana (our mandate includes making a more educated electorate).
Craig
Jun 20 2025 at 2:46pm
“How is your justification for voting for Trump any different than the Bernie Bros who vote for the Left because they think they’re getting screwed by capitalism since they have to pay for stuff? Seems like both are coming from the same place: misunderstanding the world in which they live.”
Because overall my trade is freer. You’ll find that when you subject people to unfair trade practices they suddenly become adherents of income-tax free trade (of course less income tax). Yes, Trump/TCJA + FL (no state income tax, Trump obviously not responsible for that) = free home in FL AND TN based solely on LESS taxes and NOT paying taxes to the People’s Republic in NJ which, in retrospect makes me realize I was living life in a permanent state of recession. If we want to play the guy from China gets to sell in China and the US and I get to sell in China and the US. Ok, let’s do it, but if its the guy from China gets to sell in China and the US and I don’t get to ship to China, yeah, I’m gonna take Trump and the free house {obviously not free just monies that would’ve been paid in income tax or to NJ} in FL, sorry not sorry. Subjecting people to unfair trade practices changes their tax preferences.
Jon Murphy
Jun 20 2025 at 2:59pm
I’m sorry, dude, but you are making absolutely no sense.
Craig
Jun 27 2025 at 10:05am
Then just focus there: “Because overall my trade is freer.”
Jose Pablo
Jun 23 2025 at 1:46pm
Jon, never let the facts get in the way of a good narrative.
America has been in decline for a long time, no doubt. Just look at agriculture. Only 1–2% of Americans work in it now, down from over 50% in 1860.
That’s the ultimate national catastrophe. Rural depopulation, job losses, cultural decay… oh! the slow death of those beautiful county fairs. American culture has never recovered from that loss.
We should declare a state of emergency. This has to stop, now!
Jose Pablo
Jun 23 2025 at 1:58pm
I find it striking that if I choose to trade with anyone I want in the world, that’s me been “raped”. But if I’m forced to trade with a domestic producer (not my first choice), that’s considered “freedom.”
I understand why domestic producers want me to be forced to deal with them. Sure they have some good “raping” waiting for me. What I don’t understand is how I benefit when my ability to enter into mutually beneficial, Pareto-efficient agreements is restricted (for my own good, Daddy?)
All this anti-trade narrative sounds like Newspeak to me
Craig
Jun 27 2025 at 10:18am
“What I don’t understand is how I benefit when my ability to enter into mutually beneficial, Pareto-efficient agreements is restricted (for my own good, Daddy?)”
That’s taxation of any sort though.
Comments are closed.