Trump's tariff wars...long post.

[Obrienp]

1 minute ago, BigRedX said:

 

You're still paying VAT and import duty though. It's just when buying from someone like Thomann you pay it at time of purchase and not at time of import.

Yep but it’s not German VAT @18%, it’s UK @20%. Presumably Thomann remits that to HMRC on your behalf, having collected it at point of sale. This is why the price seems to go up marginally when you enter your UK delivery address, when buying from Thomann.

 

However, the point is most countries globally do what the EU does, so I don’t think this can be counted as a tariff, or trade barrier unique to the EU.

[Al Krow]

28 minutes ago, Obrienp said:

Yep but it’s not German VAT @18%, it’s UK @20%. Presumably Thomann remits that to HMRC on your behalf, having collected it at point of sale. This is why the price seems to go up marginally when you enter your UK delivery address, when buying from Thomann.

 

However, the point is most countries globally do what the EU does, so I don’t think this can be counted as a tariff, or trade barrier unique to the EU.

 

Isn't a key point that the US doesn't charge VAT on imports but levies a generally lower sales tax?

 

They are now looking to level the playing field using tariffs. The rest of the world is going to have to suck it up or negotiate mutually beneficial trade deals.

[Downunderwonder]

3 hours ago, Al Krow said:

The EU actually has huge trade barriers: it exempts exports from VAT but charges VAT on imports. How is that not a tariff in all but name?

Edited 2 hours ago by Al Krow

VAT is a consumption tax. If something is exported it is not consumed. If VAT were put on an export it would be a tax on foreign consumption. 

[Downunderwonder]

There is a big gap in your appreciation of VAT and sales taxes. There ic no equivalence in a tatriff!!!!

 

A block of NZ butter sells for whatever PLUS GST in NZ. GST is our sales tax. When that same block of butter is sold in the EU it gets sold wlfir whatever plus TARIFF plus VAT. No GST.

[Al Krow]

8 minutes ago, Downunderwonder said:

VAT is a consumption tax. If something is exported it is not consumed. If VAT were put on an export it would be a tax on foreign consumption. 

 

Technically it's a tax on goods and services. But taking your definition surely someone buying our exports will want to "consume" them and not bury them in their back yard?

[Al Krow]

3 minutes ago, Downunderwonder said:

There is a big gap in your appreciation of VAT and sales taxes. There ic no equivalence in a tatriff!!!!

 

A block of NZ butter sells for whatever PLUS GST in NZ. GST is our sales tax. When that same block of butter is sold in the EU it gets sold wlfir whatever plus TARIFF plus VAT. No GST.

 

All sales taxes put up the prices of goods and services. A tariff is a sales tax focussed solely on imports, in effect it's a targeted sales tax, right? 

And just another form of revenue raising for a government.

 

Edited February 14 by Al Krow

[tauzero]

On 13/02/2025 at 16:23, Al Krow said:

The EU levies 10% tariffs on US car imports

The US levies 2.5% on EU car imports

 

Are the US bad guys for looking to match the higher tariffs that the EU levies? 

 

The US imposes higher tariffs than the EU on trucks, and is very protective of its pickup market. Although them good old boys that drive pickups with their rifles racked behind the cabs aren't going to drive anything but proper American iron.

 

https://www.ft.com/content/4eb97d9e-1b17-11e9-9e64-d150b3105d21

[tauzero]

8 hours ago, Agent 00Soul said:

How could the USA break up?  None of the 50 states, except for possibly Texas, could exist without the others.

 

Hawai'i did before it was stolen by the US.

[tauzero]

4 hours ago, Al Krow said:

The EU actually has huge trade barriers: it exempts exports from VAT but charges VAT on imports. How is that not a tariff in all but name?

 

VAT is also charged on sales within the EU, so that argument falls flat on its face at the slightest examination.

[Downunderwonder]

35 minutes ago, Al Krow said:

 

All sales taxes put up the prices of goods and services. A tariff is a sales tax focussed solely on imports, in effect it's a targeted sales tax, right? 

And just another form of revenue raising for a government.

 

Kinda.

 

An importer of widgets, that

go into his doofers which are sold domestically and exported, pays an import tariff on widgets.

 

All the other stuff going into his doofers from local sources he pays GST on.

 

He gets a credit on the GST paid. He charges GST on local sales and gets to keep the credit. He gets no GST credit on the tariff paid but charges GST on it.

 

He gets to claim the tariff as an expense against profits.

 

The doofers that are exported garner a GST credit for the GST that was paid in their production. No GST is embodied. The tariff may stay embodied unless a new mechanism is introduced. It is a cost of production.

 

Just now, tauzero said:

 

VAT is also charged on sales within the EU, so that argument falls flat on its face at the slightest examination.

I was about to get to that, but yeah, local sales tax is on everything, ON TOP of any tariffs.

[TimR]

1 hour ago, Downunderwonder said:

VAT is a consumption tax. If something is exported it is not consumed. If VAT were put on an export it would be a tax on foreign consumption. 

 

VAT is Value Added Tax. It levied on goods that are not basic but have some extra value. Hence luxuries. 

[TimR]

4 hours ago, Al Krow said:

Do you count fuel and adult clothing as luxuries?

 

No. The government do.

 

As I wrote, you can argue what is and what isn't a luxury, and people do.

 

Fuel attracts a lower rate. Does all adult clothing attract VAT? I'd have to look at that. 

[Downunderwonder]

The important thing is the local sales tax regime is nothing to do with what the exporting party charges to export the identical product.

[Count Bassy]

6 hours ago, Al Krow said:

 

The EU actually has huge trade barriers: it exempts exports from VAT but charges VAT on imports. How is that not a tariff in all but name?

 

Because VAT is also charged on domestically produced goods.

[Al Krow]

3 hours ago, TimR said:

 

VAT is Value Added Tax. It levied on goods that are not basic but have some extra value. Hence luxuries. 

 

Nope.

 

The "value added" is to do with how the tax is collected. You get a deduction for input tax on your cost of sales and pay over output tax on your sales. So the net VAT a business pays over to HMRC is on the margin ie the value added at each stage of a supply chain.

 

The VAT is ultimately suffered ("borne") by the end, non VAT registered, consumer. 

 

 

Edited February 15 by Al Krow

[TimR]

2 hours ago, Al Krow said:

 

Nope.

 

The "value added" is to do with how the tax is collected. You get a deduction for input tax on your cost of sales and pay over output tax on your sales. So the net VAT a business pays over to HMRC is on the margin ie the value added at each stage of a supply chain.

 

The VAT is ultimately suffered ("borne") by the end, non VAT registered, consumer. 

 

 

 

It's not. The value added is the value that is added when a product is processed. 

 

It has nothing to do with how it's calculated. 

 

https://www.google.com/search?ie=UTF-8&q=what+does+value+added+mean

 

Edited February 15 by TimR

[Downunderwonder]

42 minutes ago, TimR said:

 

It's not. The value added is the value that is added when a product is processed. 

 

It has nothing to do with how it's calculated. 

 

https://www.google.com/search?ie=UTF-8&q=what+does+value+added+mean

 

You are saying the exact same thing!

 

The sales tax is collected along the production path but not compounded. Each stage only pays in the tax on the increase in value from when they brought it into their books. That way at the end when it is consumed the purchaser is paying the whole amount of sales tax due to all the added value. The last link in the production pays on his share to add to what the government got from previous links. The sum being what the consumer paid.

[Steve Browning]

1 hour ago, Downunderwonder said:

You are saying the exact same thing!

 

The sales tax is collected along the production path but not compounded. Each stage only pays in the tax on the increase in value from when they brought it into their books. That way at the end when it is consumed the purchaser is paying the whole amount of sales tax due to all the added value. The last link in the production pays on his share to add to what the government got from previous links. The sum being what the consumer paid.

Correct (at last). VAT is designed to be neutral among businesses and sticks only with the final consumer. Consumer being an individual and not a 'taxable person', as defined in the 6th EU VAT Directive and subsequent tertiary Law in the Member States. In the UK that was the VAT Act of 1994. 

 

Power is charged at the reduced rate for consumers but standard rate for businesses. 

 

Similarly exports are zero rated and not exempt. Huge difference in treatment, as it happens. 

[Al Krow]

2 hours ago, Steve Browning said:

Correct (at last). VAT is designed to be neutral among businesses and sticks only with the final consumer. Consumer being an individual and not a 'taxable person', as defined in the 6th EU VAT Directive and subsequent tertiary Law in the Member States. In the UK that was the VAT Act of 1994. 

 

Power is charged at the reduced rate for consumers but standard rate for businesses. 

 

Similarly exports are zero rated and not exempt. Huge difference in treatment, as it happens. 

 

Thanks Steve (as our resident VAT expert).

 

As you say, the zero rating is actually a massive point, allowing businesses to recover all their input tax and no VAT charged on the export of goods and services to overseas consumers.

[JoeEvans]

19 hours ago, SumOne said:

 

...but US consumers are paying that bill to the US government, it is like a tax, money that can be spent on healthcare etc (if they're lucky). So it only harms/benefits the US in the same way taxes like VAT do.

Tariffs do push up prices of imported goods, so in that sense US consumers will have to pay, but it's true that the tariff component of the price rise goes to the US government, and might therefore benefit the US public.

However, tariffs also increase demand for domestically-produced goods, which are not subject to the tariff; this pushes up the prices of those goods. And retailers tend to maintain their profit margins as cost prices go up. So if US and EU widgets both cost $10 retail in the US, the retailer having paid $5 for each, with a 20% import tariff you would tend to see US widgets retailing at $12 ($5+20% =$6 cost price, then $6x2=$12 retail price) and EU widgets selling for maybe $11, and meanwhile only $1 from the US widgets is going to the US government.

So they have an overall inflationary effect above and beyond the tax raised, which the US public won't like at all, given that inflation was a big issue in the presidential campaign.

At some point the MAGA / Musk / crypto bubble is going to burst. It's already at insane levels - Tesla stock is priced at maybe five or ten times what any rational analysis would expect, and the 'memecoin' cryptocurrencies are probably the most unhinged market bubble since the South Sea Company. There's a software company called MicroStrategy that now just buys Bitcoin as it's business model, and its shares are somehow worth vastly more than the actual value of the Bitcoins it owns, the difference being made up with pure unicorn farts. Politics and investing are now deeply intertwined, thanks to the many millions of individual MAGA-supporting investors in the US who are heavily exposed in some very risky ways. Interesting times ahead...

[Al Krow]

Pulling some of this recent sales tax/tariff chat together, the way I would summarise it:

 

The EU levies VAT on a wide range of goods and services, both domestic and imports;

 

The US doesn't have VAT but has a lower rate sales tax;

 

A tariff is a targeted sales tax applying only to imports, paid by US consumers where the US levies additional tariffs. It is actually another means of revenue raising by the US government.

 

When something is taxed it makes it less attractive and cuts consumption. Eg cigarettes (tobacco duty), imports (tariffs), jobs (employers NI).

 

We may not agree, but I think there is a decent argument for taxing imports in preference to local jobs? Particularly if you are running a massive trade deficit with the rest of the world, which the US is.

 

Edited February 15 by Al Krow

[Steve Browning]

Just a minor tweak or two. The EU levies standard rate VAT on everything (goods and services) unless otherwise stated in the Law.

 

Sales taxes in the US can be lower but that can depend on whether the goods are taxed at just Federal, Federal and State or Federal, State and city level.

 

Worth also reiterating that VAT is charged after import Duty, so an increase in that means more VAT. An increase of 25% in import Duty would add a total of 30% to the consumer. 

[prowla]

12 hours ago, TimR said:

 

VAT is Value Added Tax. It levied on goods that are not basic but have some extra value. Hence luxuries. 

Shoes?

[Steve Browning]

17 minutes ago, prowla said:

Shoes?

I suspect the value added refers to the fact that the net effect of VAT is to add tax to the 'profit' that a business achieves when it sells to another business. The cost VAT would be expected to be recovered. It's a poor title for sure. 

[prowla]

6 minutes ago, Steve Browning said:

I suspect the value added refers to the fact that the net effect of VAT is to add tax to the 'profit' that a business achieves when it sells to another business. The cost VAT would be expected to be recovered. It's a poor title for sure. 

I agree - they should just call it sales tax.

(My intended point was that shoes aren't luxuries.)