Editorial of the Socialist issue 1316
The global stock markets have plunged in reaction to President Donald Trump’s 2 April ‘liberation day’ announcements. Around $5.4 trillion was wiped from the value of the US stock markets in the first two days. The 9.1% fall was the biggest in a week since the Covid pandemic lockdowns ground the world economy to a halt. Similar falls took place in the main finance markets internationally. As markets reopened on Monday 7 April they continued to tank. Even if some stability now returns, it is clear that the falls have been triggered by the conviction that Trump’s tariffs will push the world economy into recession. The majority of the capitalist classes worldwide are looking on in horror at the consequences for their profits of Trump’s tariffs. The horror is shared by many of Trump’s rich backers. Billionaire investor and Trump fan Bill Ackman, for example, said that the measures risk plunging the US into a “self-induced, economic nuclear winter”.
Alongside the horror, the serious capitalist press has been full of mockery of Trump’s tariffs, pointing out the ‘economic illiteracy’ of his regime’s way of working out what tariff to impose on each country. This seems to have been to simply take the US’s goods trade deficit with any particular country, divide it by the total amount of goods imported from that country, and set a tariff which is half of that percentage regardless of other factors. Even the tiny Heard Island and McDonald Islands have therefore had a tariff of 50% imposed on them, presumably in case the penguins start trying to export to the US, as they have no human inhabitants! Few countries have been completely exempt, with even those the US has a trade surplus with getting the ‘minimum rate’ of across the board 10% tariffs, as has been imposed on Britain.
Trump’s love of tariffs even led to him suggesting that it was their lifting that created the depth of the 1930s Great Depression, with, he claimed, tariffs increased too late to rescue the situation. This flies in the face of reality. In the aftermath of the 1929 Wall Street crash, it was the 1930 Smoot Hawley Tariffs Act, which raised US tariffs on over 20,000 items, and triggered major global retaliation, which was central to the severity of the Great Depression. Now Trump has shoved tariffs up to an even higher level, not seen since 1909. No doubt his intentions included using the tariffs as a bargaining chip to ‘do deals’. Regardless of that, this is a seismic shift in world economic relations. As Darren Jones, Starmer’s Treasury minister, put it “globalisation, as we’ve known it for the last number of decades, has come to an end.”
Globalisation’s limits
Of course, globalisation has not been ‘ended’ solely by the act of one powerful individual. It reached its limits long ago. While the productive forces have long since outgrown the barriers of the nation state, capitalism has never been able to fully surmount them, even in the age of US-dominated globalisation. Nonetheless, it is a sign of the growing sickness of capitalism worldwide, that the nation state has come roaring back – epitomised by Trump – as the different national capitalist classes struggle to defend their own interests in a multipolar world.
The current ‘rules-based order’, which Trump is attacking with impunity, was established by US imperialism in the aftermath of the second world war. At that stage, the US completely dominated the capitalist world. However, that was not the whole story. World relations in that period were underpinned by the clash of systems between the countries of the West and the non-capitalist Stalinist states of the East, which acted as a counterweight to the capitalist powers led by the US, while also increasing the tendency in the West to toe the US line, as a result of the pressure to unite against a common enemy. It also compelled the US to assist the post-war recovery in Europe, Japan and other countries, in order to try and prevent the further spread of ‘communism’.
The era of ‘globalisation’ which Jones is referring to, began when the Stalinist regimes collapsed. The US became a true hyper-power, able to set the framework for the world economy, with China acting as a cheap-labour assembly plant. World trade increased massively. In the decades up until the 2008 Great Recession, world trade increased from 39% as a percentage of GDP in 1990 to 61% by 2008, with two-thirds of the profits growth (to 2013) being captured by Western companies. At the same time, Western capitalism, with US imperialism dominant, restored profits by driving down the working classes’ share of national income. This was the real character of globalisation.
Multipolar world
But continuing on the path of globalisation is no longer in declining US imperialism’s interests. In today’s increasingly multipolar world, the US is compelled to try and protect its national markets against its rivals, above all China. In 2001, when China joined the World Trade Organisation, its economy at market exchange rates was barely one-tenth the size of the US. Now it has grown to almost half. Rather than just an assembly plant for US imperialism it is an increasingly powerful rival. Hence US Vice President JD Vance saying that globalisation had not worked as it was meant to where “rich countries would move further up the value chain, while the poor countries made the simpler things”. That was what led to Trump’s first term tariffs, which were kept and added to by Joe Biden, and – along with Biden’s large state subsidies for US-based industry – had already moved the US in a protectionist direction. Trump’s second term measures are heading in the same direction – but far more decisively. They represent a crude attempt to assert the power of US capitalism and to reorder global values in its interests.
Trump probably hopes that the tariffs will raise funds for the US state, thereby creating space for further tax cuts for the super-rich, make it easier for US-based companies to compete against imports, and encourage manufacturing to relocate to the US in order to avoid the tariffs. He may also imagine that he can use US might to force through a repeat of the 1985 Plaza Accord, when Japan, France, Britain and West Germany agreed to appreciate their currencies relative to the dollar in an attempt to lower the US trade deficit. Today, however, the US has less power to call the shots than it did in the capitalist world at that point, and China – which has a unique character, where the state continues to play a central role in directing the economy and foreign capital is only allowed to operate within huge restrictions – is not about to dance to Trump’s tune, as it has already shown with its fast announcement of reciprocal tariffs. Globally, including in China, Trump’s tariffs will trigger a new period of economic crisis and social turmoil. But, far from re-establishing the US as the global hyper-power, they will also further increase the world’s multipolarity.
Trump pipe dream
Nonetheless, they could lead to some more foreign manufacturing companies relocating to the US, a process which began as a result of Biden’s Inflation Reduction Act. That hope is why some US workers may dream that this will lead to the return of ‘good jobs and good wages’ that Trump promised. This is a pipe dream. Shawn Fain, President of the United Auto Workers union, welcomed Trump’s tariffs as a measure to “end the free trade disaster that has devastated working-class communities for decades”. He went on “but ending the race to the bottom also means securing union rights for autoworkers everywhere with a strong National Labour Relations Board, a decent retirement with Social Security benefits protected, healthcare for all workers including through Medicare and Medicaid, and dignity on and off the job.”
As Trump’s attempts to destroy the National Labour Relations Board have clearly shown, his Presidency will attempt further major attacks on the working class, including on health care, and on trade union rights. All wings of the capitalist class – both the ‘globalisers’ and the ‘nationalists’ – are united in their determination that it should be the working class which pays for their system’s multiple crises. Only by independent working-class struggle, including on an international plane, will the United Auto Workers, and other unions, be able to win real improvements in their members’ living conditions.
Recession risk and impending struggle
In reality, manufacturing that relocates to the US will generally be so highly automated that it will create a limited number of jobs. And in the short term the main effect of the tariffs on US manufacturing will be increased crisis and job losses, because of its disruptive effect on highly complex international supply chains. Around half of US imports are intermediate goods used domestically to produce final ones. So, for example, for every one job in US steel production, there are 80 in companies that use steel in production and will now have to pay more for it.
More broadly, the short-term consequences in the US will be economic slowdown and increased inflation as the price of imported goods goes up. On the day before ‘liberation day’ a YouGov poll showed only 23% of Americans thought Trump was making them better off financially – down a massive 19% since January. That is only going to sink further now.
The ground is being prepared for massive class struggles in the US. The same is true here in Britain. Starmer and Reeves are set to continue relentless cosying up to Trump combined with blaming the international situation for their stepping up of savage austerity. Starmer will try to appeal to our allegedly common ‘national interest’ to demand that working-class people – yet again – tighten our belts. But the working class has no common interest with the billionaires who exploit us, regardless of their nationality. Our common interests, our solidarity, is with the working class worldwide.
Trump actions are intensifying the capitalist crisis, and look set to trigger a global recession. That adds urgency to the struggle for the overthrow of this rotten and increasingly chaotic capitalism system, in order to lay the basis for worldwide democratic socialist planning.
Some capitalist commentators have hoped that Britain can escape the worst of the consequences of the turmoil instigated by Trump, ironically because of the weakness of its manufacturing base. However, in reality British capitalism, as a weaker power, outside of any major trading bloc, and highly reliant on foreign capital, is extremely vulnerable to global economic storms.
One of the central tasks facing the working class, in the US and Britain, is building independent workers’ parties – giving a political voice to the trade unions, independent of all the rotten capitalist elites and fighting for a socialist programme: for power to be taken out of the hands of the major corporations and banks that dominate the economy, so society can be run democratically in the interests of the majority, based on planning and cooperation, instead of capitalism’s ruthless pursuit of profit which leads to poverty, environmental destruction, and war.
