Q&A: What should socialists say about Trump’s tariff shock?

A production line in Poland producing cars for General Motors (Pic: Marek Ślusarczyk/Wikimedia commons)

Donald Trump’s trade war has unleashed a howling crisis. 

It has pushed the world closer to recession that would have devastating consequences for working class people in the Global North and Global South.

And it has heightened imperialist tensions between the United States and China—and raised the possibility of military confrontations.

Not all is going Trump’s way. He excluded smartphones and other consumer electronics from his steep “reciprocal” tariffs on Sunday. 

It’s a boost to Big Tech bosses as the Trump administration tries to calm the market turmoil after he launched the trade war. 

That comes after Trump paused higher tariffs for dozens of countries—but hiked the rate on China to 125 percent—last week. Trump remains determined to use tariffs to strengthen US power in the world.

What is Trump’s aim?

The Trump administration wants to rebuild the manufacturing base within the US—and he sees tariffs as a stick to beat both US and foreign corporations.

Some of the US’s biggest trading partners are China and Vietnam in Asia, its neighbours Canada and Mexico and the European Union.

But much of those imports don’t come from foreign companies. Many US corporations make their products in plants abroad, partly because labour costs are cheaper, and import them back into the US.

When they have plants inside the US, they still rely on importing parts. For instance, Elon Musk’s Tesla makes a big deal about producing electric vehicles in the US, but warned that it would still be hit by tariffs on the car industry.

Its popular Model Y—which has topped an index of “American-made” cars for three years running—sources 30 percent of its parts from abroad. “The major takeaway is that no vehicle is 100 percent US-made,” says researcher Patrick Masterson.

So, Trump partly wants to force US companies to “reshore” their operations to build up domestic industry.

And he hopes the tariffs will force some foreign companies, which currently export to the US, to set up plants in the country instead.

Why is Trump’s team obsessed with rebuilding the US manufacturing base?

The short answer is competition with China—military and economic.

Trade between the US and China has grown rapidly in the past two decades. By 2024 the total value of imports and exports between the US and China was almost nine times higher than in 2001.

China joined the World Trade Organisation (WTO) in 2001 and further opened up its economy to multinational corporations. That saw some US industries shift their operations—or parts of their operations—to China.

While this boosted the profits of US multinationals, it allowed China to build up a powerful industrial base that would help it rival the US. And it became the second largest creditor to the US in the world—indeed, the Chinese government holds almost $760 billion worth of US government securities.

Rapid growth allowed Chinese imperialism to flex its muscles, challenging US dominance in the world.

China’s plans to upgrade its industry technologically threaten Big Tech—Alphabet, Amazon, Apple, Invidia, Meta, Microsoft and Tesla. Their economic weight helps underpin US hegemony in the world—it’s ability to dominate allies and rivals.  

Is Trump’s strategy new?

Trump isn’t the first US president to be obsessed with the rise of the Asian powerhouse. The administrations of Democrats Barack Obama and Joe Biden were equally worried that China would emerge as a “peer competitor” to the US.

Obama began what was dubbed the “pivot to Asia”, focusing the bulk of US naval strength in the Pacific. And his administration began trying to minimise China’s role in the supply chain for high tech electronics.

This process accelerated under Trump’s first presidency, where he waged a campaign against the Chinese telecoms company Huawei.

Biden built on it through the Chips Act that boosted the domestic manufacture of semiconductors, a vital part of electronic devices.

This was part of a broader strategy of “Bidemonomics” that tried to leverage the power of the state to make US capitalism more competitive. It aimed to rebuild domestic manufacturing through an “industrial policy”, which included a mixture of subsidies and tariffs. The aim was to bolster the weight of US capitalism and to enable a vast rearmament programme.

Biden was forced to water down the plans due to the sluggish state of the US economy. But the administration did borrow and spend vast sums of money as it tried to rebuild domestic manufacturing.

These policies went hand in hand with the Biden administration’s brigading other states against US imperialism’s rivals. This included the hope of using the Ukraine war to humiliate Russia and send a signal to China, and the Aukus nuclear submarine deal with Australia and Britain.

Today, Trump has similar aims—maintaining US hegemony in a time of “great power competition”.

But abroad he is pursuing a more go-it-alone, transactional approach and wants allies to increase their defence spending.

At home he wants to slash taxes for corporations and significantly reduce federal spending, a break with “Bidenomics”.

Instead, he is gambling that a trade war will bully other states and corporations into signing up to his strategy.

Why did Trump retreat last week?

The bond market. Investors were selling US government bonds—IOUs that states sell to raise money—at a rapid pace last week.  

Investors purchase bonds with the promise that the money will be repaid at a later date and that they will receive a fixed rate of interest. Government bonds are considered a safe investment. 

The selling of bonds starts a process that increases the cost of borrowing for the government, raises interest and fuels inflation. And so it has a knock on effect on the real economy—and US power in the world.

China holds many US bonds—and analysts are speculating that it could be dumping them. This sort of escalation would bring the world closer to military as well as economic confrontation between the two states.

This turmoil in the stock ­markets may seem like a million miles away from the lives of working class people. But when there is a crisis at the top, bosses and bankers try to protect their profits by squeezing working class people harder. And they have invested people’s pensions into the stock market.

Will the trade war ‘bring back jobs’ to America?

Trump claimed that he was “proud to be the president for the workers, not the outsourcers”.

But the Trump administration’s plan to boost US manufacturing does not involve vastly increasing the number of manufacturing jobs. Instead, it relies heavily on artificial intelligence (AI) and automation. 

Alongside automation, Trump hopes that some manufacturing will be based on low-wage jobs in the southern states. 

The fall in US manufacturing jobs was not primarily driven by free trade and companies outsourcing jobs to the Global South. There has been a longer-term trend in Western capitalist states that sees firms plough profits into more efficient methods of production.

This sees them invest in new technology that relies on fewer workers, leading to a drop in the numbers of manufacturing jobs.

There are other limits to a “re-shoring” strategy bringing back jobs.

“It will take between three and 10 years in most cases to build a new manufacturing facility in the US,” says mainstream economist Erin McLaughlin.

“Everything takes time before you can get that picture of a congressman with a shovel in their hand.”

For example, a pharmaceutical factory that makes pills using regular equipment will take around three years to build. A plant making anything more complex, for instance chemotherapy drugs, would take five years to build.

And here, Trump’s cuts to the US Food and Drug Administration could hold up the process for approving new pharma factories.

Do trade wars lead to real wars?

The turmoil flows from the crisis of US hegemony and the breakdown of neoliberalism.

Imperialism is a global system of competing capitalist states. From the late 19th century, it has seen a fusion of economic competition between capitals and geopolitical competition between states.

In the run-up to the First World War, Germany became the main industrial and military threat to the British Empire. This competition spilled over into military confrontation in 1914. 

US imperialism built a liberal capitalist world order after the Second World War in 1945. It differed from that of European colonial empires and was based around free markets and free trade that US corporations could dominate.

There was always an economic and military dimension. The US could use the International Monetary Fund (IMF) and World Bank, set up in 1944, to project its power against rivals, allies and weaker states. 

All this was and is backed up by military might, through the Nato warmongers’ alliance, and hundreds of military bases across the world.

The Cold War was a time of superpower imperialism between the US and Soviet Union, which had carved up the world into “spheres of influence”. This saw the US integrate the other advanced capitalist states into a single political bloc—what we would refer to as the “West”.

There was still economic competition among Western states, particularly after European states and Japan recovered in the 1950s and 60s.

But it didn’t have the same potential of developing into military confrontations as during earlier phases of imperialism. The fusion between economic and geopolitical competition remained, but there was a partial dislocation of the two.

What we’re seeing today is the violent reassertion of that fusion. The world is much more like it was in the run-up to the First World War when an overstretched British imperialism fought to maintain its global power and influence.

Today the major fault line is between the US and China.

Should the left support tariffs?

The left should oppose tariffs—including Trump’s tariffs and retaliatory ones against the US.

Firstly, our main objection to tariffs is political. Protectionism assumes that bosses and workers in one country have the same interests—interests that are different to workers elsewhere.

They encourage workers to line up behind their national leaders, which has a demobilising impact on the working class movement.

Politicians push the idea to paper over class divisions and make working class people think that ­“foreigners” are their real enemy. Western leaders’ response is based on stoking nationalism—partly in the hope of deflecting anger against them.

Second, the economic arguments don’t stack up on their own terms.

One problem is that import controls and other forms of protectionism don’t protect jobs. They will harm working class living standards in the Global North and the Global South.

Many pundits have made the comparison between today and the 1930s, which saw a broader shift to economic nationalism.

In 1931 Britain imposed tariffs on “basic industries” such as coal, iron and steel, ship building and textiles.

Some 2.3 million workers were employed in those industries two years before tariffs were introduced. After eight years of protectionism, only 1.8 million worked in them.

The level of unemployment in these industries was double the general rate of unemployment in Britain in the 1930s.

Supporters of the liberal capitalist order point to that period and warn against Trump returning to it.

But the left shouldn’t be on the side of economic nationalism or fake liberal internationalism.

We should demand that working class people don’t pay for our rulers’ trade wars—and resist any attempts to make us do so.