Attack to the World Fiscal System. More or less that has done Trump with the new “reciprocal tariffs.” The US president has signed a memorandum, which will not enter into force until the beginning of April, to load against the VAT of all countries of the world. He has ordered federal agencies to study how to build tariffs against foreign products, in line with the VAT applied by countries. It can be understood that Trump has launched a VAT only to foreign products.
Unlike the threats to Mexico and Canada and the tariffs already approved against China, this has been much more careful. Trump has not launched immediately, but has ordered the Department of Commerce to study the design of a tariff. In other words, he has thrown on the slow and complex route, involving more people and agencies and giving a wide margin to study and negotiate their effects. And in addition, it has included a mechanism by which the effects of these tariffs on US inflation would be studied, which is rising above expected, and that tariffs would get worse.
What is a tariff for Trump?
The Second key is that Trump does not seem to be very clear about what a tariff is. Well, or it is not clear about what VAT is. In any case, today it has equated VAT, an indirect tax on the purchase of goods and services that apply countries internally to all products, to a commercial barrier for American products. Both the products manufactured in that same country and those of the US pay VAT equally, so it is not a protectionist measure. In no case is VAT a tax that puts the US products at a competitive disadvantage: The playing field is the same for everyone.
The Tax Foundation, a non -governmental tax expert organization founded in 1937, has denied the posture of the tycoon this week. According to analysts are Bray, Jared Wallczak and Eerica York, this argument not only reflects complete ignorance in relation to VAT operation. “Worse,” said Tax Foundation, since it displaces the fault of the lack of American competitiveness to the European VAT instead of reassessing the defects of the complex federal and state tax systems of the United States: each State takes on its own sales tax, And some do not even do it.
Almost everyone has VAT
In this sense, the US is one of the very few countries throughout the planet that does not apply that tax. Instead, local and state governments are responsible for collecting sales tax, known as Tax salts. In total, 175 countries do have it: only a few Caribbean, African, Middle East and Southeast Asian states are saved. Punishing the use of VAT would imply putting tariffs on practically all countries in the world, starting with Canada, Mexico or Israel.
The VAT argument can be an excuse to put tariffs to the EU, a club that has not been noticing for months that he wants to punish for the commercial surplus he has with the US. The problem for Trump is that the EU has a middle tariff inferior to that of the US, so acting “reciprocal” would imply lowering them in many cases, not uploading them. Hence this excuse to justify those taxes.
Deficit and public debt
Again, Trump’s base problem is that The president insists on blaming the commercial deficits of the US public debt. The commercial deficit, by definition, is canceled with an equivalent foreign investment (purchase of treasure bonds, shares, construction, etc.) and does not affect the accounts of the country. But Trump seems to confuse the public deficit (that the State spends more money than he enters for taxes) with the commercial deficit, and blames this of the public debt that the country has accumulated. Trump believes, as constantly repeats, that imports involve “subsidizing” other countries, as if the US sends money from his treasure to other states, and that tariffs involve ‘collect’ a tax to those countries, not to US consumers themselves . He has promised to impose “country by country” tariffs, starting with those with whom the US has a higher commercial deficit.
Countries with the highest commercial deficits with the US are, in this order, China, Mexico, Vietnam, Germany, Japan, Canada, Ireland, South Korea, Taiwan and Italy. Mexico and Canada are in their own group, China has already suffered tariffs, and Japan and Korea have their own arguments to justify that Trump gives them a favor treatment for their importance as US bases in Asia. Vietnam and Taiwan can face a strong threat. And then there is the EU.
And what about Spain?
In the European case, that would mean in particular to Germany, Italy and Ireland. The problem is that the EU has a customs union: a country cannot impose tariffs other than Portugal and Lithuania. The reason would be simple: it would suffice that Germany’s ‘punished’ products took a ‘walk’ through Austria or France before embarking towards the US to dodge that punishment.
In the case of Spain, for example, our commercial balance with the US is practically in ‘Tables’, so it would not be one of the objectives of the magnate wrath. In his first mandate, Trump already tried to put tariffs other than different countries, but the union remained united and avoided ‘divide and win’. Thus, it is possible that Trump, if he really wants to punish the specific countries of the EU, will have to put a general tariff on all the products of the twenty -seven, unleashing an answer from the entire union that would unleash a transatlantic commercial war.
Hidden messages and small print
The announcement of “reciprocal tariffs” is being read by the market as A delay in the imposition of tariffs. In addition, no one knows if this would be a new round of tariffs on existing ones or if it replaces the first announced. Canada, China and Mexico would also be on the list of affected countries: would this be a double tariff?
The bags have accelerated the climbs, with the Dow Jones as the most benefited. Markets buy the idea that tariffs will be more reflective. There will be a country study by country, there will be a term before they enter into force and there will be a review every six months, to study its effect on inflation.
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