In his second term as US president,Donald Trump wants to put "the American worker first" and has imposed tariffs of 25% on imports from the EU and other countries. European Union member states, and countries like Canada, Mexico and Brazil, would be among the countries most heavily affected.

The move has sparked concerns of a worldwide recession. People are worried about how they will be affected by tariffs, especially as the EU and Canada are set to impose "countermeasures" raising tit-for-tat tariffs on some US goods, such as the steel and aluminum tariffs just announced by the European Union.

But what do these increased tariffs mean? White House press secretary Karoline Leavitt tried to explain that in Tuesday's press briefing, but her discussion brought up more confusion than clarification.

Trump justified his moves back in February by pointing at an unjust US-EU trade relationship. DW Fact Check has looked at two claims that have gone viral, and explains the difference between tariffs, tax hikes and value-added tax (VAT) and what they actually mean for consumers.

Are tariffs a tax hike on foreign countries?

Claim: "Tariffs are a tax hike on foreign countries," Karoline Leavitt said in Tuesday's press briefing. The briefing was aired on Fox News and manyshared her claim online, leading to a live discussion with a reporter from The Associated Press who opposed Leavitt's claim. 

DW fact check: False

Here's why Leavitt's claim is false. First of all, it's important to define what tariffs are: It's a financial charge that a government puts on goods and services that are imported from other countries. This makes those imports more expensive. In the current case, the 25% duties on steel and aluminum would likely push up the cost of producing items ranging from drinking cans and home appliances to automobiles.

Tariffs are a form of regulation that governments apply to promote or protect domestic industry. While foreign companies may feel the impact of tariffs indirectly, through reduced sales or the need to lower prices to remain competitive, the actual payment of the tariff is made by the importing businesses.

"A European producer might lower its export prices if it fears that the US importer might reduce its demand," Julian Hinz, head of the Trade Policy Research Center at the Kiel Institute for World Economy, told DW. In the past, however, this effect hasn't been seen, he added.

"With the tariffs imposed by Trump in 2018, we have seen that Europeans have not lowered their export prices," said Hinz. This means that US importers paid the tariffs in the 2018 trade dispute, and, often, passed the additional costs on to business customers and consumers in the form of higher prices.

This might lead to less consumption or the consumption of alternate local products. Also, according to the Economic Policy Institute (EPI) ,an independent think tank, higher tariffs can lead to a decrease in exports as many US exports use imports as intermediate inputs to final goods produced in the country. "Making these inputs more expensive with tariffs will boost the price of these US exports and make them less competitive in global markets," said the EPI.

So, a tariff is not a tax hike on foreign countries but, first and foremost, a tool to charge goods and services imported to the country. This mainly either leads to higher prices that companies and customers may pay in the country itself for these imported goods, or to less consumption of foreign goods. 

Can VAT and tariffs have similar effects? 

Claim: "I've had problems with the EU because… they've tariffed us. They do it in the form of a VAT tax, which is about 20%," Trump told the press back on February 27, in his meeting with UK Prime Minister Keir Starmer in an attempt to explain why he was considering tariffs on EU imports. A lot of users commented under a post on X dismissing Trump's claim. And they are right.

DW fact check: False

Trump is confusing two things. The value-added tax(VAT) is not a type of tariff, nor does it act similarly. The VAT is a financial charge customers must pay to the government when buying goods or services.

Its rate may vary from country to country and between certain product groups inside the same country. In Germany, for instance, the standard VAT rate is 19%. Basic food, hotel stays and copyright-protected services, however, are taxed with a 7% VAT. Among European countries the average standard rate is 21.8% varying from 17% in Luxembourg to 27% in Hungary.

However, while China exempts domestically produced food on the farm level from VAT, the VAT rates in the EU member states are independent of the country of economic origin of a good or service.

A US-made car is taxed at the same rate as a car manufactured in the European Union, or anywhere else in the world. "There is no discrimination to certain countries at all, the WTO has confirmed that on other occasions," said trade economist Hinz. The World Trade Organization (WTO) is a supranational entity that oversees world trade and works as a diplomatic appellation court to settle trade disputes between member states. Yet, according to the WTO, the discriminatory character is what tariffs are all about: "Tariffs give a price advantage to similar locally produced goods."

Tariffs only apply to imported and in some rare cases exported goods and services, while domestically manufactured and consumed goods and services are exempt, according to the congressionally chartered think tank Wilson Center. Moreover, unlike VAT, many tariffs only apply to certain countries or groups of countries.

The EU, for example, imposes a 10% tariff on US cars while there is a 2.5% tariff on EU cars sold in the US. But those tariffs do not apply to all countries nor all goods in US-EU trade. That has nothing to do with a VAT, said Hinz. 

The US, for any of its trade partners, is the bigger market. In addition, the US is one of the few countries worldwide where there is no VAT in place, and along with one of the highest per capita incomes globally and number one among those with more than 10 million inhabitants, that makes the US in most, if not all, bilateral comparisons the more attractive market. 

For Hinz, that's "not a good argument" for the VAT being interpreted as unfair. "The point is that no seller, whether from Germany, the EU or the USA, should be discriminated against by a measure. And that is not the case with VAT. So, Trump's claim that the European VAT is a tariff on the US is false," he concluded.

Edited by: Joscha Weber and Rachel Baig