President Donald Trump is planning to unveil reciprocal tariffs on Wednesday to retaliate against trade practices his administration deems unfair or discriminatory. Among the grievances is the “value-added tax,” or VAT, which Trump called “far more punitive” than tariffs in a Feb. 15 post on Truth Social.

Many economists, however, disagree with that characterization.

“It would be complete nonsense” to levy a tariff on U.S. trading partners in response to a value-added tax, said Erica York, an economist and vice president of federal tax policy at the Tax Foundation.

“A value-added tax does not distort trade,” York said. “It’s not a protectionist measure, so it makes no sense to retaliate against a VAT.”

The White House didn’t respond to a request from CNBC for comment.

The precise scope of reciprocal tariffs are unclear. President Trump suggested in recent weeks, for example, that there might be flexibility on reciprocal tariffs, but on Sunday he said that the tariffs would “start with all countries.”

VATs are the most common type of consumption tax in the world, used by more than 80% of nations, Youssef Benzarti and Alisa Tazhitdinova, economists at the University of California, Santa Barbara, wrote in a 2019 paper for the National Bureau of Economic Research.

More than 170 countries worldwide use VATs, according to the European Commission.

The U.S. is the only nation in the Organisation for Economic Co-operation and Development that uses a retail sales tax (rather than a VAT) as its main consumption tax, according to the OECD, which consists of 38 member countries.

VAT rates vary by country. Most European nations charge roughly 20%, for example, though the rate ranges from an 8.1% low in Switzerland up to 27% in Hungary, according to the Tax Foundation.

The average state and local sales tax rate is 7.5% in the U.S, the Tax Foundation said.

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By comparison, foreign tariffs may put U.S. goods at a relative disadvantage: U.S. goods are hit with an import tax but there wouldn’t be an equivalent duty on domestic goods.

Put simply, VATs don’t discriminate based on product origin, while tariffs do, economists said.

“What’s confusing — and, to be honest, just misplaced — [about the White House stance] is a VAT isn’t discretionary: It applies to domestic output as well as imports,” said Bradley Saunders, a North America economist at Capital Economics. “It’s not protectionist.”

By contrast, businesses pay VATs in stages across the supply chain, according to the business’ respective “value add.” Businesses get a tax break for their portion of the VAT, and the end consumer ultimately bears the tax cost, according to the International Chamber of Commerce.

VATs around the world are “border adjustable,” according to Eric Toder, a non-resident fellow at the Urban-Brookings Tax Policy Center.

That means a nation’s exports are exempt from value-added taxes, while imports (from the U.S., for example) are taxable, he wrote.

The World Trade Organization doesn’t view this as a trade barrier, economists said.

“The academic consensus is that adjusting VATs at the border — by levying VATs on imports but exempting exports — does not distort trade flows as long as imported goods are subject to the same VAT rate as domestic goods,” wrote Benzarti and Tazhitdinova of UC Santa Barbara. “For this reason, VATs, as they are currently implemented, are considered to be trade neutral and the [WTO] allows border adjustment of VATs.”

Members of the U.S. armed forces qualify for special tax breaks, which can offer unique financial planning opportunities, experts say.

Typically, earnings are higher after military service because there are two sources of income: your new career and your military retirement benefits, said certified financial planner Patrick Beagle, owner and president of WealthCrest Financial Services in Springfield, Va. The firm specializes in military and federal employees. 

During service, it’s smart to make after-tax Roth contributions to a Thrift Savings Plan, or TSP, retirement accounts, he said. Roth deposits are after taxes, but the funds grow tax-free. 

“You’re probably making a mistake” if you skip Roth TSP contributions while serving during your lower-income years, said Beagle, who is also a retired Marine aviator.

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Another planning opportunity happens while serving in a combat zone, said CFP Curtis Sheldon, who is also an enrolled agent at C.L. Sheldon and Company in Alexandria, Va. The firm specializes in working with active and retired military members. 

“For the vast majority of people, when you deploy to a combat zone, you have tax-free income,” and even a single day of service counts for the full month, he said. Your earnings are exempt from taxes during that period, including basic pay, bonuses, student loan repayments and more, according to the IRS. 

Typically, you should aim to receive more income during that period to maximize your tax-exempt income, experts say.

For example, you can defer your reenlistment bonus until you’re in a combat zone, and the earnings will be tax-free, Beagle said.

While deployed in a combat zone, it’s also a “really, really good year” for higher-ranking individuals to do Roth conversions while temporarily in a lower tax bracket, Sheldon said. These service members may otherwise be higher earners and may have a larger pre-tax retirement account to covert.

Roth individual retirement account conversions transfer pretax or nondeductible IRA money to a Roth IRA, which begins future tax-free growth. The trade-off is investors owe upfront taxes on the converted balance.

Another benefit is the Department of Defense’s Savings Deposit Program, or SDP, which offers 10% annual interest on savings of up to $10,000 while service members are deployed in a combat zone.

To compare, the average interest rate for traditional banks was 0.41%, as of Mar. 17, according to the Federal Deposit Insurance Corporation. Meanwhile, the top 1% average rate savings account rate was 4.26%, as of Mar. 31, according to Deposit Accounts.

You can close the account after leaving a combat zone and use the money as a “slush fund” for living expenses to defer more Roth contributions into your TSP, Beagle said.

“There are all these different wickets,” he said. “You can pick and choose among all the [military] benefits” to maximize future investment returns.

Investors have pulled money from so-called ESG funds in recent years, amid political backlash, high interest rates and other headwinds.

But analysts say the outlook and long-term investment thesis for the fund category, which stands for “environmental, social and governance,” are favorable.

President Donald Trump’s agenda “isn’t ‘game over’ for ESG investing,” Diana Iovanel, a senior markets economist at Capital Economics, wrote in a research note on Tuesday.

Demand for ESG investments “is here to stay” even in the face of political pressure, Iovanel wrote.

Investors yanked almost $20 billion from U.S. ESG mutual and exchange-traded funds in 2024, after withdrawing about $13 billion in 2023, according to Morningstar.

By contrast, investors poured $740 billion into the overall universe of mutual funds and ETFs in 2024, Morningstar found.

“I don’t think we really expected something different, because of the anti-ESG backlash in the U.S. and the political environment there,” said Hortense Bioy, head of sustainable investing research at Morningstar.

Critics call ESG a form of “woke capitalism” that sacrifices returns for the sake of liberal goals.

Advocates argue that ESG investing positions investors for higher long-term returns because companies that adopt such practices are poised to be more resilient, and therefore more successful, than peers.

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Despite outflows, overall ESG fund assets grew slightly in 2024, to $344 billion, due to market appreciation, Morningstar found.

Investor demand also appears relatively high, especially among younger investors, analysts said.

About 84% of individual investors in the U.S. are interested in sustainable investing, according to a 2024 Morgan Stanley survey. Roughly two thirds, 65%, of respondents said their interest had increased in the prior two years.

Within the first few days of his inauguration, Trump pulled the U.S. out of the Paris agreement, blocked subsidies for electric vehicles, pushed for more fossil-fuel production and started a “huge pushback” against diversity, equity and inclusion policies, Iovanel of Capital Economics wrote.

The Republican-led Securities and Exchange Commission on Thursday said it would stop defending a climate-change disclosure rule in court. The regulation required a baseline transparency around climate risks and greenhouse gas emissions from certain U.S. publicly listed companies.

There’s also uncertainty about the fate of the Inflation Reduction Act, a historic climate change mitigation law signed by President Joe Biden.

Even before President Trump’s second term, at least 18 Republican-led states had adopted “anti-ESG legislation,” prompting some large asset managers to “pare back” their ESG efforts, Iovanel wrote.

The number of ESG funds contracted for the first time ever in 2024 — to 587 from 646 in 2023, a 9% decline, according to Morningstar. That means asset managers made fewer options available for investors.

“It’s very tricky for any asset manager now to be selling ESG products,” Bioy said. “They don’t want to draw attention.”

Additionally, oil and gas prices boomed after Russia invaded Ukraine in 2022. The top 10 stocks in the S&P 500 that year were from the energy sector, for example. ESG portfolios that minimize fossil-fuel exposure looked like relative laggards as a result, analysts said.

However, performance was “very good” prior to 2022, Bioy said.

For example, the typical U.S. ESG stock fund beat returns of its peers by about 4 percentage points in 2020, according to a Morgan Stanley analysis. ESG bond funds outperformed by about 1 point that year, it found.

“Any investment and any ESG investment are no different — they go through lows and highs,” Bioy said.

McKinsey research found that companies with C-suite leaders “who chase growth without considering how their strategies could impact people, the planet, and their firm’s long-term sustainability” are less likely to “lead their companies to full growth potential,” the consultancy said in a 2023 analysis of the 10,000 largest global companies from 2016 to 2022.

The goal of ESG investing is to reduce a portfolio’s long-term risk, said Jennifer Coombs, the head of content and development at the U.S. Sustainable Investment Forum, known as US SIF.

Money managers who oversee ESG portfolios also don’t aim to sacrifice investment returns for the sake of pursuing an environmental or social agenda, Coombs said. Instead, they generally believe that investing according to ESG principles ultimately boosts risk-adjusted returns for long-term investors, she said.

“This is investing,” Coombs said. “It’s not philanthropy.”

“Sustainability takes a long time,” she said. “It’s long term. And that’s the whole idea.”