Are tariffs a tax hike on international nations? – DW – 03/13/2025 | EUROtoday

In his second time period as US president,Donald Trump needs to place “the American worker first”  and has imposed tariffs of 25% on EU imports. Member nations of the European Union, and nations like Canada, Mexico and Brazil, can be among the many nations most closely affected. The transfer has sparked considerations of a worldwide recession and individuals are fearful how tariffs will have an effect on them. Especially because the EU and Canada are set to impose “countermeasures” elevating tit-for-tat tariffs on some US items, such because the metal and aluminum tariffs simply introduced by the European Union.

But what do these elevated tariffs imply? White House press secretary Karoline Leavitt tried to clarify that in Tuesday’s press briefing however her explanations introduced up extra confusion than clarification. Also, Trump justified his strikes again in February pointing at an unjust US-EU commerce relationship. DW Fact examine checked out two viral claims and explains the distinction between tariffs, tax hikes and value-added tax (VAT) and what they really imply for shoppers.

Are tariffs a tax hike on international nations?

Claim: “Tariffs are a tax hike on foreign countries,” Karoline Leavitt mentioned in Tuesday’s press briefing. It was screened on Fox News and many shared her declare on-lineand it led to a reside dialogue with a reporter from the Associated Press who opposed Leavitt’s declare.

DW Fact examine: False

Here’s why Karoline Leavitt’s declare is fake: First of all, it is vital to outline what tariffs are: It’s a monetary cost {that a} authorities places on items and providers which might be imported from different nations. This makes the imports dearer. In the present case, the 25% duties on the 2 metals would seemingly push up the price of producing objects starting from ingesting cans and residence home equipment to vehicles.

Furthermore, tariffs are a type of regulation governments apply to advertise or defend home business. While international corporations could really feel the impression of tariffs not directly via diminished gross sales or the necessity to decrease costs to stay aggressive, the precise fee of the tariff is made by the importing companies.

“A European producer might lower its export prices if it fears that the US importer might reduce its demand,” Julian Hinzhead of the Trade Policy Research Center on the Kiel Institute for World Economy, advised DW. In the previous, nonetheless, this impact hasn’t been seen, he provides. “With the tariffs imposed by Trump in 2018, we have seen that Europeans have not lowered their export prices.” This implies that US importers paid the tariffs within the 2018 commerce dispute, and, oftentimes, handed the extra prices on to enterprise prospects and shoppers within the type of larger costs.

This would possibly result in much less consumption or the consumption of alternate native merchandise. Also, in response to theEconomic Policy Institute (EPI) ,an impartial assume tank, larger tariffs can result in a lower in exports as many US exports use imports as intermediate inputs to ultimate items produced within the nation. “Making these inputs more expensive with tariffs will boost the price of these U.S. exports and make them less competitive in global markets.”

So, a tariff will not be a tax hike on international nations however, at the start, a software to cost items and providers imported to the nation. This primarily both results in larger costs that corporations and prospects could pay within the nation itself for these imported items or to much less consumption of international items.

Can VAT and tariffs have comparable results?

Claim: “I’ve had problems with the EU because… they’ve tariffed us. They do it in the form of a VAT tax, which is about 20 percent,” Trump advised the press again on February 27, 2025, in his assembly with UK Prime Minister Keir Starmer in an try to clarify why he was contemplating tariffs on EU imports. A variety of customers commented beneath a submit on X dismissing Trump’s declare. And they’re proper.

DW Fact examine: False

Trump is complicated two issues. The value-added tax(VAT) will not be a sort of tariffnor does it act equally. The VAT is a monetary cost prospects should pay to the federal government when shopping for items or providers. Its fee could range from nation to nation and between sure product teams inside the identical nation. In Germany, as an examplethe usual VAT fee is nineteen%. Basic meals, resort stays and copyright-protected providers, nonetheless, are taxed with a 7% VAT. Among European nations the common commonplace fee is 21.8% various from 17% in Luxembourg to 27% in Hungary.

However, whereas China exempts domestically produced meals on the farm degree from VATthe VAT charges within the EU member states are impartial of the nation of financial origin of an excellent or service.

A US-made automobile is taxed at the identical fee as a automobile manufactured within the European Union, or wherever else on the planet. “There is no discrimination to certain countries at all, the WTO has confirmed that on other occasions,” says Hinz. The World Trade Organization (WTO) is a supranational entity that oversees world commerce and works as a diplomatic appellation courtroom to settle commerce disputes between member states. Yet, in response to the WTOthe discriminatory character is what tariffs are all about: “Tariffs give a price advantage to similar locally produced goods.”

Tariffs solely apply to imported and in some uncommon circumstances exported items and providers, whereas domestically manufactured and consumed items and providers are exempt, in response to the congressionally chartered assume tank Wilson Center. Moreover, in contrast to VAT, a whole lot of tariffs solely apply to sure nations or teams of nations.

The EU, for instance, imposes a ten% tariff on US vehicles whereas there’s a 2.5% tariff on EU vehicles bought within the US. But these tariffs don’t apply to all nations nor all items in US-EU commerce. But that has nothing to do with a VAT, Hinz mentioned.

The US, for any of its commerce companions, is the larger market. On prime, the US is without doubt one of the few nations worldwide the place there isn’t a VAT in placeand together with certainly one of thehighest per capita incomes globally and primary amongst these with greater than 10 million inhabitants, that makes the US in most, if not all, bilateral comparisons the extra enticing market.

For Hinz that is “not a good argument” for the VAT being interpreted as unfair: “The point is that no seller, whether from Germany, the EU or the USA, should be discriminated against by a measure. And that is not the case with VAT. So, Trump’s claim that the European VAT is a tariff on the US is false,” the commerce economist concluded.

Authors: Kathrin Wesolowski and Jan D. Walter
Edited by: Joscha Weber and Rachel Baig