The Wall Street Journal reports a deeply troubling misunderstanding of economics among President Trump’s advisers:
Trump’s team will likely target nations such as European Union members with value-added taxes, or VATs. The president’s trade advisers have long viewed VATs as an export subsidy because companies are given rebates when they export abroad. VATs “will be viewed as a tariff,” Trump said in the Oval Office.
Doug Irwin explains why this is nonsense:
Another fallacy is that other countries’ value-added taxes constitute discrimination against the U.S. Most European countries tax imported goods because they also levy taxes on domestic producers. In the end, VATs are taxes on consumption and don’t discriminate against imports.
