VAT is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. Each participant in the supply chain pays VAT on their purchase price and charges VAT on their sales price, making this system widely prevalent in over 160 countries, particularly in the European Union.

President Trump on Saturday announced that value-added tax systems in other countries will be treated like tariffs — and included in his new plan to impose US levies to match.

While a sales tax is paid in full by the consumer at the point of sale, a value-added tax is collected as the product moves through the supply chain. To borrow an example from the

The White House has insisted that its new tariffs would equalize the ability of the U.S. and foreign manufacturers to compete. The European Union, for example, has an average VAT of 21.8 percent, which Trump administration officials argue puts American companies at a disadvantage​.