Alex Callinicos: Trump can’t control his tariff chaos

Trump can wave goodbye to US global dominance

“Never settle, never surrender…No matter what happens, no matter how deeply into the muck you get, claim victory and never admit defeat.”

This is the method that the young Donald Trump learned from the mobbed-up right wing lawyer Roy Cohn. We can see it at work as he struggles with his tariff debacle. But all his bluster can’t conceal the fact that he’s grappling with forces too powerful for him.

The aims behind the tariffs—taxes imposed on imports into the United States—were twofold. Firstly, to renegotiate the relationship between the US and its allies. Trade partners would obtain tariff relief if they offered economic concessions and agreed to increase military spending.

Secondly, especially for Trump’s chief trade adviser Peter Navarro, to decouple the US and Chinese economies.

China now dominates global manufacturing and trade. This economic advance allows China to challenge the US’s military and technological supremacy.

The method used to calculate the tariffs was laughable. But there was a pattern—countries participating in the supply chains stretching across Asia and the Americas from China were hit especially hard. Navarro warned, “We will want to hear from countries including Cambodia, Mexico and Vietnam that you will stop allowing China to evade US tariffs by trans-shipping exports through your countries.”

But the Trump gang don’t understand the realities of capitalist power. States and firms are subject to the impersonal economic structures of competition and investment that shape global capitalism. No one controls these.

Trump boasts about how much the stock market rises when he’s president. When it started falling recently he admitted that there would be some temporary pain. But the most important financial market of all is that in bonds. Governments borrow money by selling bonds. US government bonds are called Treasuries.

In August 1971, during the first great global shock caused by US economic decline, president Richard Nixon broke the link between the dollar and gold. The dollar remained the main reserve currency, but it floated freely in the foreign exchange markets.

The international monetary system still has an underpinning—US Treasuries. As the Marxist economist Duncan Foley puts it, “Debts of the state are the measure of value and means of purchase and payment” in contemporary capitalism.

Bond markets act as a constraint on governments. Panic in the market for British government bonds broke Liz Truss’s government in September 2022. And already in the 1990s, president Bill Clinton’s adviser James Carville said, “I would like to come back as the bond market. You can intimidate everybody.”

US Treasuries play an important role as collateral for loans. Usually, they are a safe haven. So when there’s a financial panic investors buy them to preserve the value of their capital.

But this mechanism broke down when the Covid-19 pandemic erupted. In a desperate hunt for cash, even Treasuries were sold. Central banks had to flood the markets with money.

Treasuries fell again last week over fears that the tariffs would hugely disrupt the global economy. That’s when Trump blinked and suspended the main tariffs for 90 days. As the Financial Times Unhedged column put it, “Whatever the plan may have been, its extent and its timing were ultimately determined by the movement of capital.”

China was the exception. Both sides raised their tariffs on the other’s exports to over 100 percent. The problem is that US consumer markets are heavily dependent on production in China. The supply chains that Navarro rails against serve US multinationals like Apple with cheaper but highly skilled labour.

In an obscure announcement by US customs early on Saturday morning it emerged that Chinese smartphones and other hi-tech goods were excluded from the new US tariffs. Faced with the price of iPhones doubling, Trump blinked again, though he now says the reprieve is only temporary.

“I’m very good at this stuff,” he boasted the other day. Not so much.