Comment by olejorgenb
8 days ago
Can someone explain if there's any logic at all to counting a countrys VAT as part of its tariffs? In my home country VAT is ultimately charged the end-customer and this happens regardless of the origin of the goods. How can this be a seen as a tariff?
Besides, isn't the "Use tax" most(?) American states have more or less equivalent in function?
Others pointed out that the tariff rate they are pointing to is actually just calculated based on trade imbalance. So the logic is that they have a number they want to get to and are throwing around terms that their constituents don't understand to make it sound reasonable
VAT is not a tariff, no one reasonable thinks it's a tariff but the US doesn't use the term VAT so enough people won't second guess it if trump says it's an tax on american goods
VAT is effectively a tariff though, because it disincentivizes import/trade with the US (and other foreign countries). Since the US has no VAT, it's leading to unfair competition.
Good write up here https://www.economicforces.xyz/p/stop-saying-a-value-added-t... about how VAT doesn't alter the levelness of the playing field re imports and exports
4 replies →
No, VAT is not a tariff. It applies to all goods sold, not only imported ones.
VAT applies equally to domestic and foreign companies. It's a tax.
Tariffs and barriers to trade are measures meant to incentivize production in the country imposing them. That's what free trade is meant to get rid of, that's why Trump is so keen on tariffs and likes them
If a company moved a production line to within the EU from outside because of VAT they'd still have to pay the same exact amount of VAT as they did before. It's just not an incentive in that sense
Repeating this does not lead to understanding. Give a concrete example of how the rules applies which show your point...
US has sales taxes.
If anything, VAT incentivizes sustainable economy by making production more expensive than reuse.
Bullshit. VAT is levied on domestic and imported goods, from the consumer's point of view there is absolutely no difference.
> Can someone explain if there's any logic at all to counting a countrys VAT as part of its tariffs?
There is no logic. VAT isn’t tariffs and is not discriminatory. In the same way as trade imbalance is not theft. It’s just Trump trying to find reasons to complain and present the US as a victim.
The only logic is that since the USA doesn’t have a VAT system, there is no way to do export VAT rebates.
> Export VAT rebates mean to refund the VAT paid in various domestic production stages to exporters. The purpose is to ensure that the prices of exported products are free of taxes in order to maintain a level playing field for international markets.
So that can’t exist at all for American exporters, since the USA doesn’t use VAT, their goods are taxed at a higher rate (as far as the exporters are concerned). It’s confusing, but Trump could have just asked for negotiations to get rid of this distortion.
I dont get it. VAT is end customer tax applied exactly once. The rebates exist so importers, suppliers, resellers, shops dont pay VAT multiple times. This applies to every product local or imported.
With special case of digital goods this for a looong time meant that software sold from outside EU over internet was around 20% (VAT) cheaper because VAT was ignored by the companies. That’s quite a big advantage especially for US. And a reason why EU wanted VAT to be applied equally. Many companies still ignore it but it’s illegal now.
I'm not sure I follow. When I read the rules for Norway [1] it appear the importer (in Norway) pay the VAT on the imported goods (as opposed to the the seller for domestic a domestic business). But it's nothing that indicates that this amount payed does not enter the ordinary VAT accounting. Ie.: the amount payed will in effect simply be forwarded to the end-customer, just like domestic goods. I don't understand how a "VAT rebate" would come in play here?
> Export tax rebates involve the return of indirect taxes that have been levied on inputs used to manufacture goods that are eventually exported out of the country. These taxes can include VAT, ...
So this seems to be about imported goods being more expensive in US, not the other way around? Ie. if a US company import some product from Norway they have to pay VAT to Norway? And if they subsequently sell a derived product back to Norway they do not get refunded this VAT?
[1] https://www.toll.no/no/bedrift/import/importguide#merverdiav...
2 replies →
I don't see how it's even possible to negotiate .
VAT countries apply VAT on all domestic transactions (and that includes imports). VAT countries do not apply VAT on exports because they _rightly_ assume that the importing country will apply VAT or whatever sale tax equivalent is in place in their territory.
This is not a distortion. There's really no other way to make it work.
Other thing is that when you’re VAT registered, as a buyer of parts you reclaim VAT on things you purchase as inputs. So the tax on the final product is what matters.
With US sales taxes you accrue tax all the way up the chain.
6 replies →
[flagged]
Well, they are saying, EU market is harder to operate in (because everyone pays VAT) than the US market (no VAT, also lower regulatory barriers it seems), and also EU firms have a "home advantage" benefit, for example the regulation is written for their benefit.
So US is easy to sell in for everyone, EU is "hard" to sell in for everyone, but maybe less so for EU car makers. So there is something to this argument, it's not entirely without merit.
Additionally, US car tariff used to be 2.5%, whereas EUs is 10%. The imbalance is short in justification, though across the board, EU and US charge each other similar tariff amounts altogether, so there are other areas where the US charges more.
Whether that justifies broad brush enormous tariffs in everything, and whether US does the same in other industries (defence for example) is an exercise I leave for the trader.
> EU market is harder to operate in (because everyone pays VAT)
Surely it's not exactly rocket-science to handle VAT...
Explain how it's an disadvantage for an US exporter compared to a domestic company... Give an example instead of handwaving. I'm willing to admit I don't understand all the details, but you wont convince me using this vague statement: "harder to operate in (because everyone pays VAT)" ...
If the US adjusted selected tariffs to protect selected industries the outcry wouldn't be the same, so I'm not very interested in specific examples where the US have a lower tariff than the "counterpart".
> So US is easy to sell in for everyone, EU is "hard" to sell in for everyone, but maybe less so for EU car makers. So there is something to this argument, it's not entirely without merit.
It's completely without merit. Do you really think US regulation isn't written for the benefit of US companies? It is!
From my post:
> [...] US does the same in other industries
As it happens, automotive regulation in Europe is far stricter than the US ones (emissions and pedestrian safety come to mind).
2 replies →
There is no logic to it. It's just the US going insane and Americans nodding along.
https://taxpolicy.org.uk/2025/04/02/no-vat-isnt-a-tariff-but...
https://iccwbo.org/news-publications/news/are-value-added-ta...
https://www.cnbc.com/2025/03/31/as-trump-reciprocal-tariffs-...
etc, etc.
The only reasonable reply as a consumer and/or cloud-service purchaser: Economic wide-scale boycott of the US.
[flagged]
I am not from the US but calling out a specific race, besides a specific gender, seems really messed up. You know, just swapping the races you don't like doesn't make you not a racist. Can't you guys get past the "race" issue, please?
1 reply →
They're supported by every person who isn't taking action to stop it.
5 replies →
Half the voting population voted for Trump. Twice. You can't really paint it as a fringe minority.
4 replies →
My elderly next door neighbor told me she voted for Trump because she thought that's what her (now passed away) husband would have wanted.
A tariff is a tax specifically on foreign goods. It is an artificial barrier to trade used to make domestic products more competitive. VAT is a tax applied to all products equally, so it isn't a trade barrier. You might be able to construe a convoluted argument that it is easier for domestic companies to work through domestic regulation, but that's pretty weak.
The US seems to have simply taken the value of the trade deficit with a country, divided it by total imports from that country, and used that as the tariff percentage. So in their logic, wherever there is a trade imbalance, this must be explained by barriers to trade. So in a sense this is also a repudiation of the core hypothesis of global free trade as an ideology: That, if countries trade freely with one another, they can specialise on certain production and a virtuous cycle makes everyone richer. In Trump's ideology, trade is a zero sum game, and having a trade deficit means that you are losing.
For context - here is one of Trump's posts which mention VAT: https://truthsocial.com/@realDonaldTrump/posts/1140091752662...
No details provided.
European VAT makes it difficult for American companies to compete in Europe. US has no VAT, making it easier for European companies to compete in America...
Combined with the fact that the US is the de-facto largest benefactor of NATO, Ukraine, UN, etc... then the US is getting shafted by the EU and Trump is correct in seeking ways to mitigate that.
Applying this economical pressure on the EU is a valid strategy, IMHO.
This doesn't make any sense.
European companies pay VAT in Europe. American companies pay VAT in Europe. European companies do not pay VAT in US. American companies do not pay VAT in US.
Where is the unfair competition?
I'm literally quoting you:
> "American companies pay VAT in Europe. European companies do not pay VAT in US."
VAT is a significant income stream for the EU. They take that money and re-invest it into their economy in an uncompetitive manner, whilst constantly propping up more anti-competitive regulation (which harms American businesses).
14 replies →
Can you explain how it make it difficult?
Ie. Give an example of how the system is an disadvantage for en American exporter or an advantage to an European exporter
No, you are simply incorrect, a VAT system does not make it harder for US companies to compete. It's explained well here: https://www.economicforces.xyz/p/stop-saying-a-value-added-t...
For those who don't follow the link, here's an extract from the article explaining the core situation:
Imagine a car that costs $30,000 to produce before tax. Now compare four scenarios:
1) BMW sells the car in Germany (domestic sale): Germany’s VAT (let’s say 20% for simplicity) is added on the final sale. The German consumer pays 20% VAT, i.e., an extra $6,000, for a total price of $36,000. BMW forwards that $6,000 to the German government as VAT.
2) BMW exports the car to the U.S.: Since the car is exported, BMW does not charge German VAT. Any VAT BMW paid on parts or inputs is refunded by the German tax authority. The U.S. buyer pays the $30,000 price, and since the U.S. has no federal VAT, there’s no equivalent federal tax on that sale. (A state sales tax might apply at the point of sale, but we’ll come back to that.) The key point: the German government collects no VAT on an item consumed in the U.S.. This makes complete sense because that car’s being enjoyed by an American buyer, not a German resident.
3) GM sells the car in the U.S. (domestic sale): The U.S. has no VAT, so the American consumer pays $30,000 (ignoring any state sales tax). No federal consumption tax is collected. (In states with a sales tax, the consumer might pay, say, 7% extra to the state government, but again, the federal treatment is no tax.)
4) GM exports the car to Germany: When the car arrives in Germany, it faces the same 20% VAT as any car sold in Germany. So a German customer buying the American-made car pays $30,000 + $6,000 VAT = $36,000. That $6,000 goes to the German government. From GM’s perspective, it doesn’t owe U.S. tax on that export sale (since the U.S. doesn’t tax exports of goods), but its product will bear German VAT when consumed in Germany.
What outcome do we have here? In Germany, both the BMW and the GM car cost the same $36,000 after tax, and the German government collects VAT on both. In the U.S., both cars cost $30,000 before any state sales taxes, and the U.S. government collects no federal consumption tax on either. Each country taxes consumption within its borders—no matter where the product came from—and does not tax consumption outside its borders. This is precisely the goal of destination-based taxation: neutrality. Consumers in each country face the same tax on a given product, whether it’s domestically produced or imported. And neither country’s producers carry their home consumption tax as a “ball and chain” when they go compete in foreign markets.
You forget that the US company would be taxed more in its profit to make up for the absence of an US VAT.
Whereas EU companies don’t pay other US taxes.
1 reply →
US formally don't have VAT, when most other developed countries have.
As I know, US states few decades spent on talks about implement VAT, but have not achieved agreement yet.
For equivalent, most US states have trade tax, could be returned with set of rules. So, on some abstract level it could be considered as far equivalent of VAT, which is also could be returned with set of rules.
VAT has nothing to do with this.
What you know about number of companies need to make modern automobile? What about CPU/GPU?
To be more concrete - estimate number of companies, which stay between mineral deposit and discrete GPU board which you could fit into your computer?