Besides, isn't the "Use tax" most(?) American states have more or less equivalent in function?
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 just one component though. Remember that US largely subsidizes and sponsors the defense of EU, Ukraine, Taiwan, Japan, etc - but those countries have been giving less and less back, over the past years.
2) EU businesses have to operate in their own environment and also face the VAT. There is no protectionism here. The playing field with respect to VAT is balanced, regardless of which side of the pond is (...was) an easier business environment to operate in.
Completely false. Cost of VAT is passed on to consumers not met by companies and as EU companies pay VAT too it doesn't force US companies to lower prices and so harm their margins.
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
If anything, VAT incentivizes sustainable economy by making production more expensive than reuse.
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.
> 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.
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.
> 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...
You have to keep receipts of the VAT you paid to make the thing to do this, Europe doesn't like sloppy paper work, and rightfully so. Except...America doesn't have VAT, so there are no VAT rebates, they pay taxes on inputs and the consumer pays 20% on the finished item. But you are also right: if Norway exports a thing to the USA, they aren't getting a VAT rebate either from the sales tax paid on the thing in the states (or does Norway get a VAT rebate on things exported to non-VAT countries? I'm not sure).
But really, VAT is a better way, you avoid double taxation. The US should really just adopt it and make their VAT system compatible with Europe.
"Selling goods to customers outside the EU
If you sell goods to customers outside the EU, you do not charge VAT. However, you may still deduct the VAT that you paid on related expenses, such as for goods or services purchased specifically to make those sales."
So the inputs are not more expensive to American importer. Yes the European company is compensated for the VAT they paid on an input, but this is a tax to begin with. Which the US companies not pay. So this is not unfair to the US company..
Or is there something I'm not getting?
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.
With US sales taxes you accrue tax all the way up the chain.
Sales tax exemption is a thing when buying items for sale or materials for items for sale.
That's different to a VAT, because there, as long as you're a registered business for VAT purposes, all purchases you make are exempt from VAT - either you don't pay it when you purchase and are invoiced by a business, or you can claim it back if you keep receipts. Companies have to register for VAT when revenue hits a certain amount; here in the UK it's £85k for e.g.
As a business you pay VAT when you purchase. And you collect VAT when you sell. Then you pay to the government the difference between collected VAT and paid VAT. That's what the "Value Added" part means.
However if you go into something aimed at consumers, and make a purchase, they're normally not set up for this, which is why you're able to reclaim when you have paid it.
The default (as in « the original setup ») is what i’ve described.
There are items that generate a non-deductible input tax in VAT countries (often entertainment items or cars). But usually, those will be the exception and deductible would be the default.
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.
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".
It's completely without merit. Do you really think US regulation isn't written for the benefit of US companies? It is!
> [...] 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).
In any event US cars don’t sell in Europe for a range of reasons including size and fuel consumption. Those stricter rules apply to everyone and I don’t think it’s beyond US manufacturers to meet those rules for cars sold in European markets.
If you’re saying that Europe should loosen its safety rules just so the US can export more cars then the answer will certainly be no.
Or the US companies could do a minimum amount of effort to tailor their product line for the target market.
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.
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.
No details provided.
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.
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?
> "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).
Why would that be a market distortion!?
You're welcome to stop funding our defense. Just don't expect us to continue to fund your arms industry when you tell us to buy additional weapons.
American companies do not pay VAT in in the US. European companies do not pay VAT in the US.
American companies pay sales tax in the US. European companies pay sales tax in the US.
Why are you arguing this point? It’s de-facto cheaper and easier for European companies to compete in the American markets, than the other way around.
You are arguing about rules that apply to all companies competing in Europe and then extrapolating that to say that “American companies competing in Europe” are mistreated.
And by the way - plenty of economists view taxation as impediment to free trade.
I’m not saying that taxes don’t have an impact on the economy, or the business environment, or growth, or profits…of course they do! Maybe the tax will lower demand which makes investment less appealing, and so less investment from Americans happens as a result. But there's also less investment from the Europeans in that case! And most of all, it has nothing to do with the competitiveness of American products in the European market, because the European products face the same tax. VAT does not distort the relative price between European and foreign products.
If you want to say that tax revenue is used for subsidies that are anticompetitive — well money is fungible, you can’t blame that specifically on VAT revenue, and you should be making an argument against subsidies, not the VAT. But then you will need to address the many ways in which the US subsidizes its own industries.
Have a good day!
Not everyone is an expert in this field. If you are, I'm sure you can provide a more understandable explanation.
It's not obvious to me that the different rates of sales tax/vat matter for competitio either. An example is worth thousand words here...
Ie. Give an example of how the system is an disadvantage for en American exporter or an advantage to an European exporter
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.
Whereas EU companies don’t pay other US taxes.
Well, good on you. Just don't be surprised if that leads to retaliatory, and targeted, tariffs.
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.
To be more concrete - estimate number of companies, which stay between mineral deposit and discrete GPU board which you could fit into your computer?