April 2 tariffs will ‘take into account’ VAT taxes as tariffs – WSJ

March 18, 2025 at 01:30PM

US officials have recently weighed whether to simplify the task of devising new tariff rates for hundreds of US trading partners by instead sorting nations into one of three tariff tiers, according to sources cited by the WSJ.

Trump has repeatedly said reciprocal tariffs would mean “what they charge us, we charge them” but that’s a good talking point but difficult in practice because trade is often unbalanced and includes products that don’t travel both ways.

Critically, that proposal only included ‘low, medium and high’ tariffs; not a tier with no new tariffs.

However the report also has this detail:

Officials discussed several proposals, including the three-tier approach. But on Friday when officials huddled on the plan again, the tiered proposal was ruled out, the administration official said, in favor of an individualized approach.

The report notes that JD Vance is taking a larger role in the project and was looking to meet Trump’s goals but with more flexibility.

Another important detail is that the administration is worried about legal challenges. That’s going to be an important consideration given that Congress controls tariff rates in the constitution and that makes a challenge almost inevitable.

The report also highlights how the office of the US Trade Representative could be overwhelmed with implementation problems.

It also includes a note that says that VAT taxes will be considered tariffs, which is something I have been focused on.

No matter what the administration settles on, officials expect they will take into account value-added taxes that many other nations charge on consumption within their boundaries.

I take that as a big problem.

The report also highlighted last week’s US-Canada meeting and said “officials told them that tariffs are virtually certain” on April 2.

There is a lot of bad news in this report and it’s looking like the April 2 rollout will be chaotic.

This article was written by Adam Button at www.forexlive.com.