Ever since he was elected, there’s been an argument over whether Donald Trump would be more than a conventional right wing Republican president.
Certainly the rich are doing well. Multibillionaire Warren Buffet’s Berkshire Hathaway fund will make an extra £21 billion thanks to the tax cut passed by the Republican-controlled Congress.
But then last Thursday Trump announced he was going to impose import tariffs of 25 percent on steel and 10 percent on aluminium. He claims to be targeting China, but the tariffs will hit US allies such as Canada, Germany, Britain and South Korea.
Trump defended this decision with a series of incendiary tweets. “When the US is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” he said. “When we are down £70 billion with a certain country and they get cute, don’t trade anymore—we win big. It’s easy.”
While China’s response has been low key, the European Union (EU) said it will retaliate with its own tariffs. European Commission president Jean-Claude Juncker speculated the EU might target Harley Davidson bikes, bourbon and jeans. “A harsh and clear reaction from Brussels” is being prepared, an EU official told the Financial Times newspaper. Trump reacted by threatening tariffs on European car exports.
The last real trade war was in the 1930s, after the US congress passed the Smoot-Hawley Act raising tariffs from 40.1 to 59.1 percent. This was merely one in a series of moves that broke up the world market. Britain, for example, went off the gold standard, devalued the pound and introduced Imperial Preference. This was aimed to transform the British Empire into a closed economic bloc.
The great liberal economist Maynard Keynes was relatively relaxed about this. “Ideas, knowledge, science, hospitality, travel—these are the things which should of their nature be international,” he said. “But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national.”
But from his fascist prison cell the Italian Marxist Antonio Gramsci understood what was happening more accurately. “Every important nation may tend to equip its own political hegemony with an economic substratum,” he wrote. “By following this tendency the world market would come to be constituted no longer of a series of national but of international (interstate) markets.”
In other words, the trade war of the 1930s reinforced a world economy made up of big rival imperialist blocs each with their client states and colonies. They were Britain, France, the US, Germany, and Japan. In the end, of course, this precipitated a real world war among them.
But the trade war that Trump seems to be happily embracing is a different matter. Whatever Keynes thought, production and finance are thoroughly international these days. The giant transnational corporations that dominate the world economy rely on production chains that crisscross national borders. This is one reason why Brexit threatens to get British capitalism in such a pickle.
Some of these chains are regionally concentrated—for example, in North America around the US and in central and eastern Europe around Germany. But the trade and investment of the biggest economies—above all the US and China—sprawl across the continents.
Trade war therefore isn’t remotely in the interest of the major capitalist concerns in the US. They are represented in the Trump White House by ex-president of Goldman Sachs Gary Cohn. Michael Wolff describes Cohn in his expose of the administration as “a democratic globalist-cosmopolitan Manhattanite who voted for Hillary Clinton”.
The tariffs are widely seen as a defeat for Cohn and a victory for Peter Navarro, head of Trump’s National Trade Council. He said back in March, “One of the major goals of the Trump administration is to reclaim all of the supply chain and manufacturing capabilities that would otherwise exist [in the US].” But the supply chains exist because they are profitable for the participating companies, US ones included.
“I like chaos. It really is good,” Trump told journalists last Saturday night. It looks like he’s going to get it.