Manufacturing Today - July 2017 - 12

B UY AMERICAN

E MPLOYEES

I N T E R N AT I O N A L T R A D E

COLUMN BY | MATTHEW WALSH

A Central Focus

international tax regulations,
implications for manufacturers
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Throughout his presidential election campaign, then candidate Donald Trump often stated that global trade is hurting
United States workers by driving manufacturing jobs out of
the country. In response, he promised to change the rules and
revisit regulations surrounding trade and taxes in an effort
to make imports less attractive and bring American manufacturing jobs back into the United States. Now that the new
president is in office, tax reform is a central focus in Washington. The new expansive trade policies that directly impact
manufacturers and the movement of goods coincide with new
tax rules, that will likely further impact imports and exports.
To help U.S. manufacturers better understand the impact of
potential new policies, let's examine the three aspects of global
tax regulations that most directly affect manufacturers and the
movement of goods.
12

manufacturing-today.com JULY 2017

Import / Export
Impacts from VAT
President Trump, along with his
economic advisors, claim that when
American manufacturers export
goods into a country with a value added tax (VAT), they are at a distinct
disadvantage since VAT is imposed on
those imports. However, manufacturers in those same countries exporting
into the United States do so tax free
and then receive a credit from the
country they are exporting from when
those goods leave the country. As a result, the claim is that manufacturers
outside of the United States enjoy a
large tax advantage. But that is not exactly the case.
To illustrate why manufacturers
outside of the United States do not
actually have a large tax advantage as
described, let's look at how a VAT system works: VAT is a tax on consumption, just like the sales taxes imposed


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Table of Contents for the Digital Edition of Manufacturing Today - July 2017

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Manufacturing Today - July 2017 - Cover3
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