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.

Trump signed a memo calling on his administration to determine "the equivalent of a reciprocal tariff with respect to each foreign trading partner."