US Tariffs Are a Domestic Tax, Polish Economist Warns

The latest expansion of US tariffs under Section 301 has drawn sharp criticism from economists who argue that such measures function primarily as a domestic tax rather than a tool to extract concessions from trading partners. The policy shift comes amid ongoing legal and administrative adjustments in Washington, affecting a wide range of imports and raising costs across global supply chains. Japanese automakers, already absorbing significant tariff-related expenses, face continued pressure on their North American operations and export strategies. In the Asia-Pacific region, manufacturers and exporters are reassessing production networks as additional investigations proceed. This article examines the economic arguments, the legal mechanisms involved, and the implications for Japan and regional partners through detailed analysis of cost incidence, institutional responses, and supply chain adjustments.

[Tokyo, Japan - August 6] Polish economist Waldemar Karpa has warned that recent US tariff actions under Section 301 are likely to impose greater costs on American consumers and businesses than on targeted foreign exporters.

The Economist's Warning: Tariffs as a Domestic Tax

Waldemar Karpa, associate professor of economics and head of the Economics Department at Kozminski University in Warsaw, Poland, holds a PhD from the University of Paris 1 Pantheon-Sorbonne. In a CGTN interview, he described US tariffs as sudden and widespread measures that generate market distortions and uncertainty. Karpa stressed that tariffs do not operate as a bill presented to foreign countries. Instead, they function as a domestic tax whose burden falls mainly on American consumers, according to available research. The approach, he argued, disrupts global trade flows without delivering sustained protection for domestic employment. His analysis highlights how the policy creates volatility that affects both importers and exporters across multiple sectors. This perspective aligns with broader concerns about the effectiveness of tariff-based strategies in achieving stated industrial goals. Karpa's emphasis on uncertainty underscores risks for long-term investment planning in export-oriented economies such as Japan, where firms must navigate fluctuating input costs and shifting regulatory environments without clear predictability in US trade enforcement patterns.

A New Round Under Section 301

On July 23 the Office of the US Trade Representative announced additional tariffs of 10 to 12.5 percent on imports from 60 economies, including China, under Section 301 of the Trade Act of 1974. The measures cite alleged failure to impose and effectively enforce a prohibition on the importation of goods produced with forced labor and cover 99.4 percent of US imports. Section 122 tariffs expired on July 24 after the Supreme Court limited the scope of the International Emergency Economic Powers Act. Washington then shifted to Section 301 authorities. USTR Jamieson Greer stated that the specific authorities have changed but the trade strategy has not. Since 1974 the United States has launched more than 130 Section 301 investigations. The current round continues earlier patterns while expanding coverage to additional economies. This transition illustrates the flexibility of US trade law in sustaining pressure on trading partners even after judicial constraints on emergency powers, allowing authorities to maintain continuity in enforcement tactics across different statutory frameworks.

Who Actually Pays: Evidence From US Research

Research by the Federal Reserve Bank of New York indicates that nearly half of companies subject to tariffs pass the additional costs on to consumers. The Progressive Policy Institute estimates that the tariffs could cost US consumers and businesses around $100 billion annually. The stated rationale centers on forced labor concerns, yet the United States remains one of only six ILO member states that have not ratified the Forced Labour Convention of 1930. Two small US businesses filed lawsuits challenging the measures on July 24. Q2 2026 data showed expansion in AI-driven advanced manufacturing while other manufacturing sectors stayed stagnant, with declines in factory construction spending and manufacturing employment. These findings suggest that the cost incidence and sectoral effects warrant careful monitoring as the policy continues. The divergence between advanced and traditional manufacturing highlights uneven impacts, where tariff costs may accelerate consolidation in high-tech areas while straining labor-intensive segments already facing employment contraction.

The Japan Angle: Automakers Carry the Cost

In fiscal 2025, which ended March 2026, combined costs from the Trump tariffs at six major Japanese automakers, including Toyota, exceeded 2.4 trillion yen. Toyota indicated that tariffs could lower its operating income by 1.4 trillion yen, equivalent to about $9.5 billion. Earlier data from November 2025 showed tariff costs reaching 900 billion yen for Toyota and 275 billion yen for Nissan. The 15 percent reciprocal tariff effective April 2025 raised operational costs for major exporters. Japanese firms have responded by evaluating adjustments to production locations and supply arrangements, particularly for vehicles destined for the North American market. METI continues to track these developments as part of broader trade policy coordination with industry stakeholders. The cumulative impact underscores the exposure of Japanese automotive supply chains to US tariff measures. Such figures reveal the scale of financial strain on flagship exporters, prompting strategic reviews of North American assembly footprints and potential shifts toward regional sourcing to limit future exposure.

Beijing's Response: From Summit Diplomacy to Legal Switches

At the May 14-15 Trump-Xi Beijing summit, both sides agreed to establish a Board of Trade and a Board of Investment to oversee bilateral economic relations. China committed to purchasing at least $17 billion per year in US agricultural products and restoring access for US beef. The White House said China agreed to ease export restrictions on critical minerals including yttrium, scandium, neodymium, and indium, though China's readout referred only to exploring solutions. President Trump invited President Xi to the White House, tentatively for September 24, 2026, and China's Foreign Minister Wang Yi confirmed the visit. Xi described the relationship as constructive and strategically stable, emphasizing stability for three years and beyond. He also highlighted Taiwan as the most important issue. A November 2026 trade truce deadline remains a key reference point for observers. These commitments reflect efforts to stabilize ties through institutional mechanisms while managing core geopolitical sensitivities that continue to shape the trajectory of bilateral trade negotiations.

Asia-Pacific Supply Chains in the Crossfire

The tariff measures affect regional supply chains that link Japanese, ASEAN, and East Asian manufacturers. The United States is still conducting Section 301 overcapacity investigations involving 16 economies. Developing countries are expected to bear a significant share of the resulting adjustments. Japanese automakers and electronics firms with production networks spanning multiple Asian economies face added complexity in sourcing and logistics. METI has emphasized the importance of stable trade rules for maintaining competitive regional value chains. Exporters in ASEAN economies that supply components to Japanese and other multinational operations are monitoring the investigations closely. The combination of new tariffs and ongoing probes creates uncertainty that may influence future investment decisions across the Asia-Pacific region. This environment encourages firms to diversify supplier bases and accelerate nearshoring initiatives, though such shifts require substantial capital and time amid persistent regulatory ambiguity.

What to Watch For

Pending Section 301 investigations continue to cover multiple economies. The scheduled September 24 White House visit by President Xi and the November 2026 trade truce deadline represent near-term milestones. Two small US businesses have already filed legal challenges to the latest measures. Japanese trade officials and industry groups are assessing potential effects on export competitiveness and supply chain resilience. The broader pattern suggests that tariff authorities may remain available across administrations regardless of specific legal vehicles. Observers in Tokyo and other Asian capitals will track both the diplomatic calendar and any further administrative actions that could alter tariff coverage or rates. Sustained vigilance on these fronts will help regional stakeholders anticipate adjustments in enforcement intensity and prepare coordinated responses through multilateral forums.

The economist's assessment that tariffs operate as a domestic tax carries direct relevance for Japanese manufacturers and Asia-Pacific exporters navigating the current environment. Continued monitoring of cost pass-through, legal proceedings, and supply chain adjustments will be essential as the September summit and November deadline approach. Regional actors are likely to prioritize diversification and dialogue to mitigate further disruptions.

By Kenji Tanaka, Staff Writer

This article was produced with AI-assisted research and editorial support. Reporting is based on sources cited in the article.