VAT

Unraveling trade deficits might be very simple. Let me try to explain.

President Trump complains that the United States is stupid and being hosed in its trading with most other nations. One focus of this gripe centers around the innocuous value added tax (VAT) which, in most cases is a cumulative tax paid to the nation host during the various manufacturing sequences  ... but which is then removed when such products are exported. This very much is effectively a national subsidy for exporters. And most countries with whom we trade have VATs therefore put us at a trading disadvantage. Here is a compendium of countries with VATs: US Council for International Business List.

And in most cases these same countries impose a VAT on goods that are being imported into their countries ... see: VAT on Imports. This is the equivalent of a tariff or duty. So VAT, which seems so innocuous to the layman, is an insidious way of beefing up exports and discouraging imports. No wonder the United States has been running huge balance of payments deficits and Trump is down on our trade negotiators.

Rather than adding Trump's "border tax," perhaps we should also jump into the VAT to fix things?