Transatlantic Trade Monitor: Facts You Need Now | The Silent Tax War: How VAT and Tariffs Are Rewriting Global Trade Strategy

By Noa Sussman, Director of Global Solutions, TECEX

Global trade isn’t just about free trade agreements or currency fluctuations anymore. While those factors still matter, a quieter — and often underestimated — force is reshaping how companies produce, move, and sell their goods across borders: taxes.

Not the headline-makers like corporate income tax or capital gains. I’m talking about the less glamorous but increasingly powerful trio: VAT (Value Added Tax), tariffs, and duties. These tools, once left to compliance teams and customs brokers, are now sitting squarely on the desks of CFOs and supply chain strategists.

Make no mistake — this is a tax war. It may not dominate the evening news, but its impact is very real.

In a previous article, “Demystifying VAT, Duties, and Tariffs: The Trade Taxes Reshaping Global Commerce,” I explored how these mechanisms work and what sets them apart. Since then, what’s become even more clear is that these aren’t just tools for collecting revenue — they’re strategic levers. And they’re being pulled, hard.

This piece looks at how VAT and tariffs are now directly influencing global trade strategy — often more than traditional economic pressures.

VAT: More Than Just a Sales Tax

Many still think of VAT as a simple sales tax. But it’s more strategic than that. VAT is a way for governments to capture tax revenue where consumption happens, rather than where a product is made.

In the past, VAT quietly moved through supply chains, reclaimed by businesses along the way and ultimately paid by the end user. But things have changed. The rise of digital services, cloud platforms, and cross-border e-commerce has forced governments to act. They’re not just taxing where something is sold — they’re taxing where it’s used.

The EU’s digital VAT rules, Australia’s GST on foreign e-commerce, and similar moves by countries like South Korea and South Africa all point in the same direction: asserting fiscal control over remote sellers and service providers. For businesses, this means increased complexity — and risk. Even a small misalignment between supply location and tax jurisdiction can trigger double taxation, penalties, or reputational issues.

VAT has moved from a back-office process to a frontline concern.

Tariffs: Economic Tool Turned Political Weapon

If VAT is the scalpel, tariffs are the sledgehammer.

Tariffs are hardly new, but they’ve taken on a new role — as tools of political signalling and economic pressure. We saw this clearly during the Trump administration, when sweeping tariffs on Chinese imports disrupted supply chains overnight. Suddenly, sourcing decisions had to be revisited, and tariff classification codes became mission-critical.

That trend hasn’t reversed. Tariffs are now routinely used in geopolitical chess games: from U.S.–China tensions to EU–UK friction to South–South trade dynamics. They’ve become less about protecting domestic industries and more about sending messages — or punishing trade partners.

Businesses are left to deal with the fallout: unpredictable costs, compliance headaches, and disrupted plans. And this can happen with little warning.

Duty Drawbacks: From Niche to Necessity

One outcome of all this volatility is the renewed focus on duty drawback programs. These aren’t new — but they’ve gone from obscure to essential almost overnight.

In short, a duty drawback allows companies to reclaim duties paid on imported goods that are either exported again, returned, or used in exported products. For instance, if you import components to assemble a product in the U.S. and then sell that product abroad, you may be eligible for a refund on those duties.

Previously, this was something only a few customs-savvy companies tapped into. Today, it’s become a buzzword in boardrooms. With tariffs and duties adding real weight to landed costs, companies are digging deeper for recovery opportunities — and duty drawbacks are increasingly seen as low-hanging fruit.

Taxes as Trade Signals

Governments are using taxes not just to raise revenue, but to send signals:

• High import duties on clothing? They’re pushing for local manufacturing.
• VAT on cross-border software sales? They want a share of the digital economy.
• Zero tariffs under free trade agreements? They want reciprocal trade partnerships.

For companies, these signals are strategic markers. They show where governments are encouraging investment — and where they’re putting up barriers. Reading these correctly and responding through smart structuring, sourcing, or tax planning can create real competitive advantage.

From Cost Line to C-Suite Concern

For years, taxes on trade were a line item — tucked under “freight & duties.” That’s no longer the case.

With costs fluctuating due to policy — not market logic — leadership teams are taking notice. The questions are sharper now:

• Are we overexposed to tariff risk?
• Can we shift origin or manufacturing to benefit from preferential rates?
• Are we leaving money on the table by not reclaiming duties?

These questions are no longer optional. They’re part of strategic planning. The companies that build tax into their operational design — from supply chain to pricing — are faster, leaner, and more resilient.

Conclusion: A War in the Background, but with Frontline Impact

What we’re seeing is a quiet restructuring of global trade, driven not by trade wars in the traditional sense, but by persistent, complex, and deliberate tax policy changes.

This silent tax war is shifting the rules of global commerce. It’s forcing businesses to think differently — not just about cost, but about control, agility, and compliance.

Companies that treat VAT, tariffs, and duties as strategic variables — not static expenses — are the ones best positioned to thrive. Those that ignore the signals? They’ll feel the squeeze, one shipment at a time.

The battlefield has shifted. The question is: have you shifted with it?

Compliments of TecEx – a member of the EACCNY