The spat over VAT

The Indicator from Planet Money

NPR

Business

4.7 • 9.2K Ratings

🗓️ 15 April 2025

⏱️ 11 minutes

🔗️ Recording | iTunes | RSS

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Summary

If you've ever passed through airport customs overseas and been refunded a VAT — or value added tax — for souvenirs, you've benefited from the VAT system. But President Trump says VAT is unfair to the U.S. On today's episode, we learn what VAT is and what it isn't.

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Transcript

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0:00.0	NPR.
0:11.7	This is the indicated from planet money. I'm Patty Hirsch. And I'm Adrienne Ma. It's been a couple
0:17.0	weeks since President Trump declared a national emergency due to the trade and economic practices of America's trading partners. Since then, we have had some whiplash.
0:26.6	He's said that again. Yeah, Trump said he'd keep some tariffs, but he'd pause others and also
0:32.3	crank up the tariff heat on China. Yeah, it's been a bewildering time. And there's one area that's still
0:38.3	making economists and investors particularly puzzled, the focus of the Trump administration
0:43.7	on value-added tax, VAT or VAT for short. Trump's order calls VAT a non-tariff barrier to trade
0:52.8	that distorts the market.
0:54.7	Now, this is not what most economists think.
0:58.1	Most economists say that that is simply the equivalent of a sales tax,
1:02.2	which, just like in the U.S., everybody pays regardless of where the goods came from.
1:07.0	But this has not stopped the Trump administration from using VAT as a reason to slap tariffs on America's trading partners.
1:15.1	So on today's show, we'll examine the spat over VAT. We'll explain what it is and why Trump isn't happy about it.
1:22.7	That's coming up after the break.
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