The Trade War, at Its Root, is a Class War
by Gary Porter
Tariffs, sanctions and military brinkmanship have become the preferred strategy of the US hegemon especially since the 2008 financial collapse, the long recession and the renewed decline in profitability. These elements constitute a sharp move away from neo-liberalism toward protectionism and hyper-nationalism. The US has consistently moved in this direction under Trump, then Biden, and now Trump for a second time.
To this we must add the remarkable rise of China to a peer competitor position economically, diplomatically and militarily – evoking the fear and loathing of the American ruling class. Further, there is the narcissistic swagger of Donald Trump, a man of little knowledge and even less intellectual subtlety. His wild swings in trade policy, tariffs and sanctions leave chaos in their wake.
As every first-year economics student knows, tariffs are a tax on imports. They are paid, not by the exporting country, but by the importers and, to the extent possible, passed on to the consumer in the form of price inflation in the recipient country. Trump's tariffs are paid largely by American consumers resulting in crisis levels of economic unaffordability for American workers and their families.
Trump’s rationale for his massive and unprecedented use of tariffs is that the US, which buys 2 trillion dollars a year more than it sells, is being ripped off by practically every other country. Trump asserts that he is going to re-balance this “injustice” by erecting an almost universal tariff wall, forcing producers, he says, to relocate inside the United States. In the past, a rising US national debt based on the strength of the US dollar as the recognized currency to settle debts and store value, maintained US credit; it permitted the US to finance big trade deficits. But recent challenges to the dominance of the US dollar by the BRICS countries, and the debt service straight jacket tightening on the US state is forcing an anxious reconsideration by America’s capitalist rulers.
Of course, nobody is ripping off the US, quite the contrary. Since WW II, through the dominance of the US dollar and the US dominated World Bank, the International Monetary Fund, and many other international institutions, the US has ruthlessly exploited the rest of the world to its own advantage. Trump’s express policy reflects his own view of himself as a perpetual victim.
In a world dominated by capitalism, where the powerful big capitalists always eat the smaller ones, there has never been free, or even fair, trade. Such concepts, applied to the real world, are purely delusional.
The flailing efforts of the US-based capitalist rulers to defend their hegemony and improve profitability is resulting in rising economic hardship around the globe. Rising tariffs result in falling exports from many countries to the US and lead to an increase in unemployment. Counter tariffs against US tariffs, for example, implemented by the Carney government, lead to rising prices in Canada.
These miseries add to the long-term shortage of housing, the long-term rise in food prices, in the cost of pharmaceuticals, the accelerating decline of infrastructure, more climate chaos and collapsing government services.
China’s infrastructural wonders, its advances in rail transportation, and more, highlights the degree of stagnation and decline in the West. The homelessness, drug addiction, garbage on the streets and increasing abject poverty in the West is jarring by comparison.
The working class and low-income folks in Canada and globally are sure to suffer the most in Trump’s infernal tariff war. This is evident in Canada with the recent loss of thousands of jobs in auto, steel and aluminum industries. 31,000 jobs are gone in manufacturing; 27,000 in wholesale, retail and trade sectors. Unemployment is now up to 6.9 per cent and is sure to climb. Honda just decided to delay, by at least two years, an electric vehicle investment of $15 Billion in its auto manufacturing plant in Alliston, Ontario, an hour’s drive north of Toronto. The downturn in EV sales, clearly, is not unrelated to the tariff bite. In the food sector, the number of tariff-hit products at the grocery store could soon spike as pre-tariff inventory runs out, said the CEO at Loblaw Companies Ltd. Another sign, impacting U.S. workers, is the $12.5 Billion expected to be lost due to a big decline in international visitor spending. Among 184 economies analyzed by the World Travel and Tourism Council, the US is the only country that is projected to see a decline in global visitor spending this year.
Is the trade war working? Is manufacturing and employment rising in Trump’s America?
The Trump brain trust has failed completely to understand the global nature of supply chains and the impossibility of consolidating these in one country. Their promise to bring back good manufacturing jobs is based on “the good old days” of tens of thousands of high paying jobs in the car industry, the steel industry, the railroads, jobs at which a father could earn enough to support the family, and where vacations, pensions and other benefits existed. This nostalgia is based entirely on the fact that these jobs were unionized jobs, a fact never mentioned and probably not even understood by the Trumpists.
But under unrelenting ruling class attack and weak pro capitalist union leadership, unions in the US represent a mere 10 percent of the working class today, down from 35 percent in 1954.
Auto factories and other manufacturers in China, for example, have virtually no workers. They are entirely automated. Their staff consists of computer engineers, product designers, business analysts, lawyers, accountants, contract negotiators, logistics experts, and other university educated professionals. Assembly line jobs straight out of high school are mostly gone and are not coming back. Thus, repatriation of factories, even if it were possible, will not create old time jobs.
Another factor is that production has been globalized. To build an airliner or a fighter jet, or an energy plant, requires hundreds of thousands of components built from a wide variety of materials. The needed resources are located around the world, excavated, refined into usable semi-products, shipped to parts manufacturers, and finally transported to an assembly point. All of this requires a complex subculture of skilled workers, logistics, manageable regulations, and stability in all these areas in order to produce commodities under capitalism at a profit. When you add to this global complexity a declining rate of profit, rising global competition, and the rising fight for economic, financial and political independence in Africa and Latin America, the stability of capitalist rule declines relentlessly. Under Trump, a perennial author of chaos, capitalist stability is unattainable.
Negotiation on trade and tariffs with the Trump administration is nearly impossible. The administration has no clear goals -- because there is no way to stem the decline of imperial America. Further the US has a clear record of abrogating any treaty it signs. Its word is worthless. Trump’s tactic, as always, is to bully everyone into rushing to Washington and negotiating, one at a time, on his terms. Pro-capitalist war monger, UK (Labour) Prime Minster Keir Starmer rushed into a very bad deal. Nobel prize-winning economist Joseph Stiglitz said the deal was not worth the paper it was written on.
China, by contrast, did not even communicate with Trump. They raised tariffs on US goods and left Trump waiting by the phone. Trump said he was talking to China. China said they were not talking. Finally, Trump contacted China because the US now needs China more than vice versa, and the Americans and Chinese met in Geneva. The Chinese delegation walked out 15 minutes after the first session began. They reported that the US was disrespectful -- that there would be no return to the ‘century of humiliation’ for China. A second meeting resulted in significant tariff reductions, but sanctions by the Americans on microchips, and by China on rare earth metals, remained in place. America’s ruling class remains an implacable foe of China’s continuing rise. Just imagine what the People’s Republic could accomplish if it was a healthy, bottom-up, workers’ democracy – and how the American rulers would absolutely gag at that.
What should workers do to defend against increasing capitalist chaos? Tiny reforms and weak efforts to save and possibly ameliorate capitalism by social democrats and other petit bourgeois ‘saviors’ are obviously of no lasting value. The evident problems confronting humanity go to the very roots of the capitalist system.
Capitalism has given rise to a system based on global supply chains and international logistics. Forces of production strain mightily to escape nationalist fetters and transcend vindictive trade wars emanating from capitalist nation states. If only they could burst free onto a global worker-controlled production system, integrated internationally for the benefit of the workers of the world.
How to realize that perspective? First, we must insist that the capitalist class bear the economic cost of its own failures. On the job it means building unions everywhere, and fight to defend and improve wages, benefits and workers’ safety. Tie workers’ wages to the cost of living, as a protection against inflation. Safeguard jobs from increasing automation and artificial intelligence by reducing the hours of work as unemployment rises. The priority is to share the work that needs to be done.
Build solidarity. Independent militant labour action is necessary on the job and required across society to politically challenge the ruling capitalist Liberals and Tories. Rebuild the labour-based New Democratic Party by seizing the opportunity provided by the abject failure of the current, pro-capitalist, timid leadership in the recent federal election. Strive to elect a new, revitalized, rank and file, militant leadership to defend and extend workers’ rights and fight for a workers’ government. Demand that the Canadian Labour Congress reach out to American and Mexican workers to stop the capitalists from imposing the economic pain of capitalism’s unabating decline on workers anywhere, and join together to fight for a Socialist North America.