VAT applies equally to domestic and foreign companies. It's a tax.

Tariffs and barriers to trade are measures meant to incentivize production in the country imposing them. That's what free trade is meant to get rid of, that's why Trump is so keen on tariffs and likes them

If a company moved a production line to within the EU from outside because of VAT they'd still have to pay the same exact amount of VAT as they did before. It's just not an incentive in that sense