Great question!

The key difference lies not in whether VAT or sales tax is applied to exports, but in how VAT-based economies structure taxation throughout production versus how the US does.

The imbalance exists not because VAT is unfair. It exists because the US system does not have a VAT that can be “discounted” and therefore US exporters end up paying more and baking the cost into their products. Consumer ends up paying more on the other EU end.

In VAT systems, businesses prepay taxes at every stage, then receive a full refund on export, removing embedded costs. I think I said that? There is no equivalent mechanism on the US side.