Nikkei Asia’s Moriyasu says some Trump tariffs are a “consumption tax”

The Trump Administration is using a three-pronged approach with its new tariffs including tariffs to institute a “de facto consumption tax “on U.S. consumers, according to Ken Moriyasu, Washington Correspondent, Nikkei Asia.

Moriyasu, who briefed the Propeller Club of Northern California (PCNC) on April 22nd, said the Trump Administration is imposing three different types of tariffs: one to bring offshore production back to the U.S.; second, tariffs that are designed as a consumption tax; and finally tariffs aimed at unfair trading practices such as those imposed on Chinese goods.

Three Types of Tariffs

In his remarks Moriyasu said: “If you look carefully, there are three categories of tariffs, and each has a different role. And for countries like Japan and South Korea, the strategy to deal with it is to understand what these three are aimed for and not to confuse them … So, first there is what is called the Section 232 national security tariffs, and this was implemented earlier in March …with the 25% tariffs on steel, aluminum and automobiles, those three have been announced, but the Administration has hinted that they will be extended to pharmaceuticals and semiconductors.”

Moriyasu went on to explain: “The aim of this … tariff is that they will bring these critical industries back to America because through COVID, (the Trump Administration) realized the vulnerabilities of depending too much on China for their supply chain. So, they want these industries to be back in America. And this is non-negotiable.”

In the case of Japan, “if you look at Japan, 30% of its exports to America are automobiles and automobile parts. So, the natural inclination for the Japanese trade delegation is like, please reduce these auto tariffs. But it is a wrong strategy because it is not going to happen. The White House's explanation is that for factories in America, the utilization rate (of) the automobile factories … is 60%. So, if you just bring that up to 100%, that is enough.”

Increased Production Without New Investment?

He says the Trump Administration believes there is room for increased production in America without any new additional investment by existing car makers: “So, it's not going to cost the (Japanese) automobile companies anything and it will not lead to price increases. It's problematic for companies like Mazda who … produce in Mexico and bring it tariff free from under the U.S.M.C.A. (U.S. Mexico Canada Agreement which entered into force in 2020). So, they were going to have to either build new factories in America, which is going to be very expensive, or they borrow the Toyota factory and increase production there. So that is the first bracket.”

Mazda Toyota Manufacturing (MTM), the only North American facility to produce the Corolla Cross, is a joint venture partnership between Mazda Motor Corporation and Toyota Motor Corporation. The plant began production of the Corolla Cross in September 2021, and of the all-new Mazda CX-50 in January 2022. The plant has the capacity to produce 300,000 vehicles a year, evenly split between the two nameplates. MTM’s investment increased to $2.311 billion when the parent companies announced an additional $830 million commitment in the summer of 2020. The plant is located in Huntsville, Alabama.

The second bracket: “is the baseline 10% tariff on all countries. And this is, I think, basically a de facto consumption tax on the American consumer that when there is a tariff, as you all know, the foreign country does not pay the tariff. The American importer pays the tariff. And whether they absorb it themselves or pass it on to the consumer is the option. And it is most likely that it will be passed on to the consumer. The Trump Administration is fine with that. It will be a stable new source of revenue for the government. It's the only way a Republican president can implement tax increases. Trump is explaining this as China paying billions and billions of dollars. And as long as his base is happy with that, … that is great...”

And then “there's the third bracket which is the reciprocal tariffs, which has gone up to 145% for China, 24% for Japan, 25% for South Korea. It is currently under a 90 day pause. It's gone down to 10%. Note that it hasn't gone down to 0 because the 10% is the consumption tax on the American people. Remember, Trump will never go below 10% because he needs this to pay back the deficit. He wants to leave office with a healthier federal budget than he inherited ... So, this 10% will not go away … As for the countries like allies like Japan and South Korea, it will be a tool for trying to get concessions. In the case of Japan, it will be tied to security. Japan pays about $2 billion a year for host nation support. The money (is used) to host the U.S. bases in Japan. There are 55,000 American troops in Japan, the largest overseas presence of any country. Japan pays the most host nation support among all the allies. It pays about 50% of the cost and America pays the rest. So, there will be negotiations to raise that. So that is where we are.”

Peter Navarro and Reciprocal Tariffs

In the case of the reciprocal tariffs, President Trump has been strongly influenced by Peter Navarro: “I think Trump's instinct (on the) reciprocal tariff (was) whispered by Peter Navarro: if you have really steep tariffs, other countries will have no alternative but to bend the knee.”

Peter Navarro is an American economist who has been the senior counselor for trade and manufacturing to President Trump since January 2025. He is the architect of President Trump’s tariff policies arguing that foreign trading partners have unfairly exploited the United States.

Navarro served a four-month jail sentence last year after being found guilty in September 2023 of ignoring subpoenas for records and testimony by the House panel investigating the Jan. 6, 2021, attack on the U.S. Capitol.

Moriyasu said the high tariffs on China are a negotiating tactic: “I think the 145% on China is a negotiating tactic, but I think they do want to encourage decoupling from China.”

Moriyasu says the Trump Administration has been trying very hard to get China to agree to some sort of deal, but China is taking its time to respond: “Today in the White House press briefing, Karoline Leavitt, White House Press Secretary, was asked about … negotiations with China. The Administration had been saying, the ball is in China's court … Trump … repeatedly said China really wants a deal. But that is probably not the reality. If I talk to Chinese diplomats, they say: “You know, there is no way China is going to make that first call because China’s position is ‘wait and see’. So, today in the press conference, Leavitt said, ‘the President and the Administration are setting the stage for a deal with China …This tells me that the White House is making moves, is reaching out to the Chinese to facilitate a call. Because, you know originally there were talks of China’s President XI and Trump having a meeting within a hundred days of the start of the Trump Administration. That is not happening … If the Chinese are coming … to the White House … they want everything to be put in writing and guaranteed success before they come. But then the Zelensky White House meeting happened (where Trump yelled at the Ukrainian President), and the Chinese are terrified that Trump will treat their leader in the same way. So that is really not happening. I think the earliest date they will meet is in November in South Korea for the APEC (Asia-Pacific Economic Cooperation) meeting.”

Ken Moriyasu is a diplomatic correspondent for Nikkei Asia based in Washington, D.C. Nikkei Asia is the English-language arm of Japanese media group Nikkei, which also owns the Financial Times. Moriyasu is a six-time foreign correspondent for Nikkei, based in Washington, Cairo, Beijing, Dalian (China), New York and Washington again. He covers the intersection of geopolitics, economy and business, focusing on the people who make the decisions.