Here is the funny thing about the tariff vs VAT discussion.
They’re not the same except they both collect revenue on goods produced in another country which is being imported to a nation.
the definition of a tariff
A tariff is a tax imposed by one country on the goods and services imported from another country to influence it, raise revenues, or protect competitive advantages.
A tariff is a tax imposed by one country on the goods and services imported from another country.
www.investopedia.com
So in one sense when Trump says he’s going to impose tariffs to raise revenue. Everyone losses their bloody minds, this is not right or fair! Yet those same people vigorously defend other nations who use VAT as it’s simply a means with which that nation
raises revenue. Yet both systems (VAT or Tariff) are imposing a revenue creating system on products and production that occurred in another nation.
When the EU charges a VAT on US imports they are in essence imposing a tax on US workers and production.
Today a tariff is “
viewed” as means of punishing or coercing another nation. Yet this has not always been so. At our founding tariffs were the primary means of “taxation” to support our federal government.
A Historical Perspective On Tariffs
As a historical background, tariffs used to be a major source of government revenue. Between 1798 and 1913, they accounted for anywhere from 50% to 90% of federal revenue
https://www.forbes.com/sites/greatspeculations/2025/02/18/the-surprising-history-of-tariffs-and-their-r
Yes they can be used as a means of coercion or protectionism. But that is not universally their sole purpose.
What is really at issue though is two fundamentally different tax systems. In the US taxes are collected at the federal level thru the profitability of companies or individuals thru an income tax. It’s very complicated bordering on obtuse.
So when they export it, it is not that a tax has not already been imposed on those goods. That tax of production “VAT” is also already calculated into the distributors price to sell on the export market. They have included that tax burden into the price they’re willing to sell at. Or they will go broke. So it is not reasonable to claim that not imposing a VAT of US imports creates an unfair advantage over an importing nations domestic produces. Those imports from the US have a tax burden on them before they ever leave the US.
So no, I still see there is no defensible way to claim it’s inappropriate to tariff or VAT US imports. Both are generating revenue.
Yet somehow how it’s unreasonable or inaccurate to claim the US cannot “collect revenue” off of goods produced by another nations imports to the US.
Or that it is unfairly going to raise the cost of goods for US consumer.
As far as I can tell that is exactly what VAT charged on imports is doing to people in other nations.
So that brings us back around to the complicated issue of the two contrasting taxation systems. On the surface the VAT tax seems much more straight forward and much easier to apply.
I question though who and how are the value added amounts determined.
Is it a straight forward intrinsic value or cost of resources and labor or is it some hypothetical potential value being assessed by a gov agent.
I don’t know how it’s done overseas and it likely varies from nation to nation.
Either way for the individuals of the world VAT of tariff they are both a revenue generating schema for governments and they both add to the price consumers have to pay.
I’m sure the EU is not going to stop collecting VAT taxes on goods produced in the US. And think Europe should get used to the idea that the US is going to collect revenue on goods produced in Europe.
The question of how taxation is assessed and applied transnationally will be with us going forward.