Value-Added Taxes (VATs) and Trade Wars
The article discusses how Value-Added Taxes (VATs) can be used as weapons in trade wars, highlighting their impact on consumer prices, competitiveness of American goods in international markets, and trade imbalances. It criticizes the hypocrisy of free trade advocates who denounce tariffs but praise VATs, arguing that VATs are essentially tariffs with additional taxes on sales of domestically produced goods.
Key Points
- VATs raise consumer prices on a broader array of goods than tariffs
- Foreign VATs can make American goods less competitive in international markets
- VATs favor exports over domestic consumption, contributing to trade imbalances
Pros
- VATs can be used as a tool of industrial policy to incentivize production for export markets
- VATs can encourage exports and discourage imports, potentially reducing trade imbalances
Cons
- VATs can disadvantage American exporters by increasing the retail prices of their products in international markets
- VATs can lead to structural advantages for foreign producers at the expense of American manufacturers