Now Trump wants to impose tariffs on countries that have VAT
First of all, what is VAT?
Here is a good explanation
A value-added tax (VAT) is not a tariff, it is a consumption tax assessed on the value added in each production stage of a good or service.
VATs are border-adjusted, meaning they rebate tax on exports and impose tax on imports. They’re trade neutral.
VAT is applied to all goods within a country, including those that are domestically produced. In other words, for a given country, there is no difference in treatment between goods produced in the country and goods imported from the US. It's a level playing field. However, when that country's goods are exported to the US, VAT is subtracted so Americans don't have to pay it.
A tariff by contrast is only imposed on imports from other countries, to make them more expensive compared to domestically produced goods. Tariffs tilt the playing field to domestic producers.
President Trump is obviously struggling to understand the difference between tariffs and VAT.
Suppose reciprocal tariffs were put on other countries, and they included VAT, how much would be charged?
Here is the table:
There will be retaliation - probably not one for one, but in indirect ways. Defense contracts cancelled, taxes put on services imports from the USA, American businesses barred from bidding for government contracts, that kind of thing.
The biggest impact will be on Americans themselves, as the cost of all goods should jump. There will be an inflationary shock, which will impact the Fed funds rate. Bond yields will spike and the US govt will find it more expensive to borrow.
Some people think this is all a bluff and a negotiating tactic. But both Canada and Mexico negotiated USMCA with Trump in his first term, and he tore it up within a couple of weeks of re-entering the White House.
So is it worth bothering to negotiate with him, or is it better to just slap retaliatory tariffs on, and diversify to doing business with the rest of the world?
So everyone will be having a trade war with the US, but not with each other?
Yes. The US will be putting tariffs on everyone, and they will reciprocate. But Canada has a free-trade deal with the EU. They are in CPTPP, so tariff-free trade should continue outside the US.
Well it looks like tariffs including VAT are definitely going ahead - Trump signed an executive order. So we shall find out how this works in practice.
Tell your leaders to drop the barriers already on US goods. Than it’s even and zero.
Seriously? The president doesn’t understand the difference? You are a clown 🤡
In my opinion, Trump doesn't understand the difference between VAT and tariffs. If you believe otherwise, then explain why you believe VAT and tariffs are the same thing, instead of flinging insults.
For someone who "pretends" they are in favour of free speech, you are remarkably keen to shut down dissenting opinions.
All this policy does is copy the same exact fees put on US goods. It’s crazy anyone thinks this is Trump being insane. It’s just matching how said country treats US.
That is exactly what he wants. More domestic producers. That's all I hear from him in Canada.
I don't think he is struggling to understand. He wants to bost domestic production.
Negotiating in the beginning is pointless. Tit for tat tariffs would be the only way to go. Than after a few years the population will demand some trade deals on certain products they can't produce.
The population is the one that doesn't understand the impact it will have on them. The government/politicians will make lots of money off the tariffs at the populations expence.
They way Canada is dealing with this is boycotting US goods (our biggest trading partner) and promoting Canadian goods more. Canadian's are asking groceries stores to put American products in the international aisles and clearly state what is Canadian products.(Something that should of been done a long time ago.) At least that's the narative by the mainstream media.
I could see Canada having specific aisles for different countries in groceries stores, as we make new trade deals. We already have stores for different countries. I think it will be good in the long run. More selection to choose from.
The tit for tat tariffs won't hurt Canada as much as it would hurt other Countries because we deal with a lot of international trade in the first place.
This is just my opinion from what I have observed. I have not financial background.
It’s amazing how much bias the author has. As you pointed out obviously he knows the difference. Hey what can ya do. Some people just watch too much mainstream media 😂
Not to mention I'm pretty sure he copy & pasted this whole post.