This episode explores the Trump administration's controversial stance on the value-added tax (VAT), a consumption tax used in most countries but not the US. Against the backdrop of President Trump's declaration of a national emergency due to trade practices, the discussion centers on the administration's unusual classification of VAT as a non-tariff barrier. More significantly, the podcast contrasts the administration's view with the consensus among economists who consider VAT functionally equivalent to a sales tax, regardless of origin. For instance, the podcast uses the example of a chair's production process to illustrate how VAT is levied at each stage, ultimately borne by the consumer, similar to US sales tax. However, the Trump administration argues that VAT rebates for European exporters create an unfair advantage, while overlooking the US's own export subsidies. The podcast further reveals the administration's seemingly arbitrary tariff calculations based on trade deficits, a method criticized by economists as nonsensical. Ultimately, the episode concludes that the indiscriminate tariffs, regardless of their rationale, will likely harm the US economy and increase geopolitical tensions.
