Since taking office on 20 January this year, Trump has announced the biggest programme of tariffs on goods imported into the US in modern history.
By Sam Morecroft
In March, 25% tariffs on all steel and aluminium goods entering the US were announced – including products made from these metals – and in June this was doubled to 50%. A 20% tariff was placed on the majority of goods from the EU, although this was later reduced to 10%, and now tariffs on EU cars and pharmaceuticals have been set at 15%. The tariff for Canadian goods was set at 35%, although this seems to have been reduced to less than 6% on most goods following retaliatory tariffs from Canada.
More recently, the US has increased tariffs on imports from India to 50%. The Trump regime’s highest tariff threats were aimed at China, who at one point were threatened with 145% tariffs. Beijing responded by stating that China would reciprocate with tariffs of 125%. In reality, US tariffs on Chinese goods have been set at 30%, while China has imposed 10% tariffs on US exports into China. At the same time, Trump remains locked in a battle with the US courts, which are attempting to block these tariffs over fears of economic chaos.
Why is Trump doing this?
Trump claims that other countries are ‘cheating’ the US, because the US has a trade deficit with the rest of the world, meaning that it imports more goods and services from other countries than it exports. This has been the case for many decades; in fact the US has not had a trade surplus since 1975. In large part, this is because relatively lower wages in other countries mean that goods can be produced at a lower cost in places like China, India and Mexico than in the US. In the neoliberal era, from the mid-1970s onwards, many US corporations have chosen to outsource or offshore production to increase profits.
Trump also says that tariffs will boost domestic production, and encourage investment in US manufacturing. While tariffs have been far less commonly used in the neoliberal era, there is some history to this approach. For example, after World War 2, many countries in South East Asia, Africa and Latin America pursued a policy called Import Substitution Industrialisation, where tariffs and other limits on imported goods were used alongside subsidies and other forms of support for domestic industry, with the goal of creating national industries that could compete in the global market with companies from the US and Europe.
However, for Trump, trade policy is a weapon of war. It is not just about moving industry back to the US, where economic woes and AI overinvestment are already creating hiring freezes and layoffs. It is about using threats to push back against Chinese imperialism’s forays into control of certain markets and to extract better deals on things like rare earth minerals, which are critical to sectors such as big tech.
What do Marxists say about tariffs?
Marxists recognise the devastating effects that free and unregulated trade can have on the working class – as the experience of the last few decades of neoliberalism shows. But both free trade and tariffs, and other forms of economic protectionism, are merely different tools in the capitalist armoury whose primary function is to ensure capitalist profits. The ruling class in different countries will use these tools when it suits their interests. When the US economy was in a position to benefit from free trade in the post-war era, that is the policy it pushed.
Marx explained that free trade was not a positive for the working class, but accelerated the contradictions of capitalism and sharpened class struggle. He also recognised that tariffs and other limits on importing goods could be used to prop up inefficient capitalists, and to force further extraction of capital from the working class by making them pay a higher price for goods – in effect, an additional tax on workers.
The Russian revolutionary Leon Trotsky also criticised tariffs, specifically in relation to Import Substitution Industrialisation, stating that while this might aid the development of a bourgeois nationalist project, it would never allow workers themselves to escape their subordination to global capital.
Will it boost US manufacturing?
In reality, Trump’s strategy is unlikely to boost US manufacturing. While he is attempting to discourage imported goods, he is doing nothing to invest in US manufacturing or develop a US industrial strategy, and more expensive goods for US workers are also likely to reduce the purchasing power of the US domestic market.
Furthermore, evidence from his previous term of office, when he implemented more modest tariffs on steel, suggests that the knock-on effects will wipe out any potential benefits. It was claimed that these tariffs encouraged up to $20 billion of private investment in the steel industry and a net gain of 3,200 steel jobs. But because of retaliatory tariffs and higher import costs, the US economy lost around 75,000 jobs overall. And because of the logic of capitalism, industry that is ‘returned’ to the US will be done so on the most favourable terms to the capitalists, not the workers, meaning more exploitative conditions and lower wages.
Conflict with China
Trump’s tariffs have also played a role in an attempt to weaken the Chinese economy as part of the US-China inter-imperialist conflict. This can be seen in the recent increase in tariffs on India, which the Trump administration specifically justified because of India’s close economic and military links with Russia.
The meteoric rise of Chinese capitalism has been heavily driven by export-led growth, particularly to wealthy Western economies. By breaking up the global free trade regime, Trump – or more likely those advising him – hope to significantly reduce China’s economic power.
In reality, Trump is the symptom of capitalist crisis. His chaotic and reactionary policies are just the latest indicator of a sick system. Workers cannot look to solutions within capitalist free trade or protectionism – both are merely two sides of the same coin. Neither can we look to the courts to stop the economic chaos of Trump 2.0. The only way forward is through organised mass struggle to overthrow the capitalist system and replace it with democratic workers’ control over the economy and to fight for international socialism.
