Trump’s Tariff Wars

Unlike his first term, Trump, who has the support of both the Republican Party majority and the Congress with both its wings, forms a clear majority in the High Judiciary, and also has the open support of the technology giants symbolized by Musk, caused great turmoil both in the USA and in the world with the decrees he signed and the attitude he took as soon as he took office. The most noticeable aspect was the result of the decisions taken regarding the increase in customs duties. These tariff increases were not unexpected. One of the main promises of Trump’s last election campaign was to protect the US manufacturing industry, bring American capital back to the country, and increase investment and therefore employment by imposing or raising customs duties. At this point, what was unclear was the extent of additional taxes to be imposed on which countries or product groups. It was known that big bosses from various sectors had quite deep negotiations with Trump to ensure that these decisions did not affect them.

Making a serious increase in customs duties is a method that has been excluded in international economic competition for several decades. One of the mottos of neoliberal economic programs and globalizing capitalism was free world trade. Naturally, resorting to excessively raised tariff walls that eliminate this freedom takes this commercial competition from its normal dimension to an extraordinary dimension, which is why many call this situation a “trade war”. Although there is no problem with this naming in itself, the comments that evaluate the “trade war” in question as a sign of a “cold war” between rival imperialist poles are not correct. Because there is already a very hot war going on in a different way, and this war is growing in rings and spreading to different regions of the world. At its core lies the hegemony war of the imperialists. Therefore, today we have to think of the clash called the trade war as an inseparable part, an area, a lever of this hegemony war, or a stepping stone to the next stage at some points.

Again, another reality that we need to underline in the context of the trade war is that this is not a program specific to Trump or the Republicans. The trade war, which was ignited in Trump’s first term, was carried out by methods such as mutual increases in customs duties with China, various sector or product-based import and export restrictions, and the exclusion of some Chinese companies from the US and Western markets. Restrictions due to the pandemic that broke out in the same period were also added to these. But in all this process, some agreements were also reached in the negotiations between the USA and China. We need to underline here that the restrictions or additional customs duties imposed by Trump, especially those related to technology and strategic sectors, continued in the Biden era, and even increased much more in some areas. Therefore, as we have emphasized at that time, it became clear that the trade war in question was not Trump’s madness but a strategic approach of American imperialism. Thus, as targeted, China’s growth was slowed down and destabilized.[1]

New tariffs and the nonsense about “America’s liberation day”

Trump, with great hypocrisy and concealing the facts, emphasizes the foreign trade deficit.[2]He supposedly raises customs duties to eliminate this situation. And he does not refrain from imposing additional tariffs not only on his rivals in the opposite pole like China, but also on his neighbours like Canada and Mexico, and other capitalist countries he competes with, which are components of the Western alliance he has led so far, and defending the justification of this practice. Moreover, he is so sure that what he does is right and fair with a narcissistic self-confidence that when his rivals say that they will take similar steps in response to these tariff increases, he raises the threats even more and starts shouting as if those facing him are taking this step out of nowhere: “I will retaliate!” Thus, what he does is retaliated by the other, and what the other does is retaliated by him again and again, creating a cycle of gradually escalating.

It would take pages to write down the step-by-step developments, the decisions taken mutually, and the retaliations. Therefore, it will be sufficient to mention the latest point and the period immediately before it. At a press conference on April 2, Trump announced the customs duties that 185 countries trading with the US would be subject to, in a table. According to Trump, these new tariffs would be a “Liberation Day” when American industry would be reborn. Within the scope of this plan, it was announced that a general tariff of 10% would be applied to all trading partners of the USA except Canada and Mexico, which are within the scope of the USMCA tripartite agreement, to be effective from April 9. Additional taxes were imposed at the rate of 20% on the European Union, 10% on England, 34% on China, 24% on Japan, and 32% on Taiwan. As soon as this plan was announced, all attention was turned to the retaliation race between the USA and China. When China imposed an additional tax of 34% on the USA at the same rate, this time Trump put an additional tax of 50 points on the table. On April 9, when the taxes came into effect, China immediately made a 50-point increase. Upon this, on the same day, Trump announced that the additional tax rate to be applied to China was immediately increased to 125%, the tax rate for all other countries was temporarily reduced to 10%, and the plan announced on April 2 was postponed for 90 days. Subsequently, China increased the tax rate to be applied by 41 points to 125%. Within a few days, as a result of the pressure of American technology monopolies, Trump announced that computer-cell phone-consumer electronics products and semiconductors were exempt from these tariffs.

As can be seen, this arm wrestling between the USA and China, which continued with mutual retaliations, rapidly progressed to the point of madness. The Chinese side announced that US goods would not find buyers in the Chinese market with the current rates, and therefore, they could remain indifferent to the subsequent US-sourced tax increases. Afterwards, in a way that would hit the US in its vital spot, it banned the sale of valuable metals and minerals extracted in the country to foreign countries! We will see who will give up first, but it is obvious that it is not possible to apply these rates permanently, and trade cannot be done with these rates.

While announcing the tariff decree on April 2, the brazen thief Trump, ignoring the fact that American imperialism plundered the whole world, shamelessly claimed, “We have been robbed and plundered by both our friends and enemies until today,” and argued that with these tariffs, he would put an end to this robbery and achieve the salvation of the USA. Trump’s arguments have no reality or internal consistency, and he has no such concern anyway. For example, he puts forward the foreign trade deficit to justify the additional tax, but he also imposes additional taxes on countries from which he makes great profits from foreign trade.

Let us underline that when Americans look at which country they have a trade deficit with, they only take into account the trade in goods and completely exclude the trade in services (banking and finance, digital services, tourism, media, consulting, etc.). However, while they are the world’s largest exporter in this field, no one is even close to competing with them! Moreover, the fact that a significant portion of the products that constitute the deficit they give in the trade of goods are the products that US-based companies produce abroad and bring to the USA is completely ignored. China, with which the USA has the largest foreign trade deficit in the trade of goods, (partially with its breakthrough in recent years) and Mexico and Vietnam are largely within this scope.

It is useful to draw attention to one more important point in Trump’s discourse. This discourse, which presents its commercial rivals and even its political allies as enemies that plunder America, and talks about plunder and national liberation, is a psychological warfare method aimed at legitimizing a real hot war to be waged directly against them in the coming period in the eyes of the American people.

Aging “friendships”

We said that although the biggest and most serious rival of the USA is China, European countries are also not excluded from the target. Although the announced April 2 tariffs were postponed for 90 days, the threat against European countries still continues. In addition to the tax increases that directly target imports from certain countries, there are also product-based import tax increases made in order to support the production of certain products in the USA. For example, recently, an additional 25% customs duty was imposed on the import of steel and aluminium and all kinds of motor vehicles. While announcing these taxes, Trump also said that “The European Union was established to destroy the USA”. Although exaggerated, this statement reflects a reality. Thus, it has fallen to the indiscreet Trump to reveal the truth that is the “open secret” about the EU. The President of the European Central Bank, Christine Lagarde, says that Trump’s trade war will harm all countries and the world economy, that some will be harmed more than others, but that in the end everyone will lose something. But Trump already knows this, he says to both China and the EU, either you make concessions or you will all suffer much greater damage from me.

On the other hand, from the perspective of the Trump administration, Canada and Mexico are as much of a special target as China. Because, due to being neighbouring countries, a part of the American manufacturing industry has shifted to these countries, and rival countries like China have also made quite large investments in Mexico to avoid tariffs by taking advantage of the same neighbourhood and the benefits of the USMCA agreement. The customs duties imposed by Trump on Canada and Mexico mean the end of the “common market” created by the free trade agreements[3]that came into effect in 1994 and were revised in 2020, in its current state. While trade between the three countries has increased several times thanks to this agreement, there have been significant decreases in consumer goods prices, especially in the USA, which has given the capitalists a leverage not to increase wages. Moreover, since a part of the manufacturing industry in the USA has also shifted to Canada and Mexico, this development has played a role in both increasing unemployment and further suppressing wages. This change in manufacturing is so striking that the intermediate goods required for the production of some products cross between these three countries 7-8 times. The new tariffs mean that intermediate goods are subject to a new tax at each crossing and an increase in costs. This will either result in these increases being passed on to the consumer, leading to an increase in inflation, or a further decrease in profit rates. Specifically for Mexico and Canada, Trump’s expectation is that manufacturers will prefer the option of relocating back to the USA in the face of this pressure. Jim Farley, the CEO of Ford, who has greatly benefited from the international division of labour due to the decrease in product prices and increase in profit rates in the previous period, criticizes Trump’s tariff policy precisely for this reason: “Tariffs open a big hole in the US industry”.

Shaken financial world, profiteering billionaires and exploited workers

Since taking office, major tremors have been experienced in the stock markets due to the fear that Trump’s policies will hit global trade and therefore production areas. The declines that started on February 20 with these fears (and the strengthening concerns that the growth from artificial intelligence is a bubble) accelerated after Trump’s address to Congress on March 5. The panic triggered by the issues he emphasized in this speech (such as saying that some difficulties may be experienced due to tariffs) caused a 4% loss in one day, especially in NASDAQ, the index of technology companies (the “magnificent seven index” was 5.4%), which was the biggest daily loss in the last three years. The market value of the companies decreased by 1.7 trillion dollars in one day. One of the companies most affected by this hurricane was Tesla, where Elon Musk, who poses as Trump’s right-hand man. In Tesla shares, which rose rapidly following Trump’s election, the decline since the beginning of the year reached 45%! In other words, approximately half of the company’s value, 600 billion dollars, “flew away”. Nvidia, which emerged from a huge bubble expansion with the “artificial intelligence” boom last year, also lost 1 trillion dollars in value in the same period!

The subsequent developments showed that this collapse was only a preliminary tremor. Following the tariff announced by Trump on April 2, which he called “liberation day”, huge losses were experienced in all stock markets on that day and in the following days. The losses, which had already started on February 20, reached 15% in the S&P500 and 21% in the NASDAQ with this blow. In the first week of April, 6.6 trillion dollars “flew away” from the American stock markets in just two days. When the Asian stock markets opened at the beginning of the week, the collapse there was no less than that in the USA, reaching 11%.

While signing this decree, Trump said that the USA would earn 2 billion dollars a day (7.2 trillion dollars a year) in tax revenue thanks to these taxes! Almost all of the money expected to enter the treasury in one year “flew away” from the US stock market, that is, was stolen mostly from the pockets of “small investors”, in two days.[4]As always, big investors, having received the necessary information much earlier, managed to sell their shares at high prices before the collapse started, and then buy the same shares at much lower prices following the collapse, thus transferring a portion of those trillions that were said to have flown away into their own pockets.

However, this time the phenomenon of profiteering took place so strikingly that a complete triple profiteering was experienced. On the first day of the week following the collapse (April 7), upon the news that “the new tariffs would be postponed for 90 days for countries other than China,” American stock markets, cryptocurrencies, and the prices of various commodities, especially oil, increased again by 7-10% within an hour and then quickly returned to where they started, thus creating an opportunity for another profiteering of approximately 3 trillion dollars in the stock market alone. As if this was not enough, on April 9, 4 hours after Trump called on his social media account that it was “a great time to buy” on the stock market, the 90-day postponement decision, which had been denied before, was officially announced! The stock market soared twice as much as the previous climb and closed the day with a 9% increase. In other words, those close to Trump scored the third time. Trump boasted about how two billionaires who visited him at the White House earned hundreds of millions of dollars in one day with this profiteering and commented, “not bad at all”! The peak of profiteering is being experienced, is there any need for another word to describe the decay of capitalism?

J.P. Morgan says that the stock market crash and “severe volatility” experienced are “similar in severity to the crises of 1987, 2008 and 2020.” One thing needs to be clarified: The great destruction experienced at the beginning of April was actually the last (perhaps for now, the last) stage of the collapse that had been going on since February 20. In other words, as the apologists of capitalism have been doing these days, and as it will probably go down in economic history, the real basis of this financial crisis is not actually Trump’s tariff decrees. Since the pandemic, a balloon has been swelling in the American stock markets with the trillions of dollars that the FED has printed and distributed. Although some air escaped from this balloon with bank failures two years ago, the same inflation methods continued in the following months, and in addition, the immense fuel brought by the so-called “artificial intelligence revolution” was added to this. Like every balloon, this was bound to burst sooner or later; big investment funds were waiting for a sensational event that they could use as an excuse to press the sell button and realize their profits. The DeepSeek earthquake from China brought a huge drop in technology stocks, but the balloon did not completely deflate. It seems that big investors essentially found the selling signal they were looking for and waiting for in Trump’s tariff decrees. Although there has been a recovery with the 90-day postponement decision, it is doubtful how long this can last. Because probably just before this temporary recovery, BlackRock, one of the giant investment funds, was saying that the stock market could be expected to fall another 20%!

Following the tariffs on April 2, many economists (including all local presidents of the FED) and bank analysts stated that if reciprocal tariffs are applied at these levels, a decrease in growth and an increase in inflation would be inevitable, and some even said that in this case, “stagflation would be the best-case scenario.” Some experts calculate that these could reduce the growth of the American economy by 2 points and put it into recession, and could increase inflation by up to 3 points, and also reveal that if importing companies reflect these tax increases in prices, American households will have to spend an average of 1500-2000 dollars more per year. In other words, contrary to Trump’s lies, while billionaires are profiteering, workers will continue to struggle to survive in the grip of rising unemployment and rising prices.

Will Trump’s economic policy work?

It would not be correct to think that Trump’s policy will not yield any results. For example, following his recent announcement that he would retake the Panama Canal and a bill to ban ships carrying Chinese goods, the Hong Kong-based Hutchinson company, which controls the ports at the exit of the Panama Canal, sold all its ports except those in China to the American company BlackRock! Another example: In the Congressional presentation we mentioned, Trump demanded the abolition of the Chip Law.[5]He argued that instead of scattering money under the name of incentives with the law in question, it would be more profitable to increase customs duties on chip products and force investors to produce within the US borders. Then, TSMC, the world’s largest chip manufacturer based in Taiwan, announced that it would open another factory in the USA. Even the company’s managers call this investment “a non-profit geopolitical decision.” In other words, a step taken as a bribe to prevent sanctions from Trump! Following the announcement that additional taxes could be imposed on the pharmaceutical industry, the giant pharmaceutical monopoly Roche announced that it would invest 50 billion dollars in the USA and provide employment for 12 thousand people within five years. Immediately before that, another giant, Novartis, had announced plans to invest 23 billion dollars in the USA.

It is possible that Trump’s policy of protecting the existing manufacturing industry in America and bringing back some of the foreign investments to the country as much as possible by creating pressure through tariffs may yield results in some areas. But this policy has no chance of achieving general success by producing the results it claims. Because the American domestic economy has undergone very large changes in the last 40 years.

The USA is still the world’s largest power economically. Its military power is beyond comparison with its rivals or allies. It has a larger military power than the sum of its biggest rivals. In the financial sector and also in the service sector that includes it, it is again the world’s largest power both with its domestic production and in terms of service exports. The situation is different when it comes to the manufacturing sector. The domestic manufacturing of the USA has experienced a great decline in the last quarter of a century. The main reason for this is the relocation of production abroad by American monopolies. The approaches that evaluate this phenomenon as the deindustrialization of large imperialist powers are one-sided and therefore incorrect. Because if we look not at where the production of material goods is made on a country basis, but at which company or on behalf of which company it is made, it is seen that American companies still rank first in the global manufacturing sector. Even if not to the same extent, the phenomenon of relocating manufacturing abroad is also valid for the leading imperialist powers of the EU.

Trump’s claim that the aim of the tariffs is to bring American companies back to the country and make the USA the “workshop of the world” again is one of his election promises/lies. Every sensible capitalist knows that it is not possible to attract the production centres of monopolies that have made huge investments abroad back to the country by using only the tariff stick. For this, there is a need for raw materials and labour at the same cheapness as abroad within the country. In addition, it requires the elimination of a real trade union struggle within the country, the abolition or neutralization of environmental protection regulations, and a suitable incentive and tax system. Proximity to the markets where the product will be sold is also an important factor. It is not possible for multinational monopolies to ignore all these other factors just because customs duties have increased a lot, and even if they had to do so, it is not possible for so much investment and infrastructure created over the years to return to the country all at once. Moreover, it is not possible to prepare the conditions for such a “return” without directly attacking the rights, freedoms and organization of the working class and environmental regulations. Therefore, if Trump really intends to implement the program he promised, it means that he will open the door to a very harsh conflict both within the bourgeoisie and between the bourgeoisie and the working class. These statements also explain the main reasons why “economic nationalist” programs always have both a fascist and a militarist essence. Although the Trump administration strongly harbours and fuels both tendencies, in our age, under the conditions of globalized capitalism, it is not possible to achieve a permanent return towards an “inward-looking,” “economic nationalist,” protectionist economy. Trump is trying to put his rivals under unbearable pressure, to extract great concessions from them, to ensure that they accept US hegemony and its rules. As long as the issue of reciprocal additional tariffs remains in effect, the US economy will undoubtedly suffer from this. But the Trump team believes that its rivals will suffer much greater damage. For this reason, they are constantly raising the stakes and trying to make the other side give up.

Similar criticisms come from economists of different schools and even those with completely different worldviews against Trump’s policies. It is reminded that having a trade deficit is not necessarily a bad thing for that country. It is said that protecting the domestic market and domestic capital with customs duties will lead to price increases and a rise in inflation. It is emphasized that the increase in costs will reduce the competitiveness of companies that already manufacture and export within the USA, and that this situation will lead to closures and increased unemployment. It is stated that bringing back production centres scattered in foreign countries, which are cheap labour heavens and where there are no environmental regulations, will lead to a decrease in productivity. It is said that transportation costs and therefore costs will increase as they move away from raw material sources. The contribution of immigrant workers (especially skilled ones) to the country’s economy is reminded. It is stated that it is possible to keep wages low thanks to cheap agricultural products from abroad.

All of these are generally correct determinations. But Trump is not unaware of these either. Yes, he wants to protect some manufacturing sectors in the USA by increasing customs duties reasonably, and he will also be able to finance his project to reduce the corporate tax paid by American companies thanks to this tax revenue. But he has no intention, nor can he have, of making the tax levels he is currently uttering permanent. However, with his attitude and policies in this direction, Trump is putting so much pressure on his global rivals that while he says he will fight with China, he suddenly finds the interests of some American monopolies against him. Therefore, these moves of Trump also increase the tension within the American ruling class. By going beyond everyone’s expectations, saying “I am a businessman, I understand bargaining”, he causes serious unease in his own party and allies as well. So much so that, in order to prevent the earthquakes in the stock market, a bill limiting the President’s unilateral tariff setting authority has been submitted to Congress with the signatures of a Democratic and a Republican senator (and for now, with the support of at least 12 Republican senators). Although Trump insists that he will veto it, it is said that even his sidekick Musk sees these steps as going too far and is trying to persuade Trump to withdraw the additional tariffs.

What Trump (and American imperialism in general) wants is not to break up the world market, end free trade, eliminate globalization, etc., but to slow down, control, and extract significant concessions from China. It aims not to end globalization, but to reshape it in line with its own interests, to make its rivals accept its hegemony by teaching them a lesson. It is not possible for him to implement even most of the tariffs he has voiced, let alone all of them, permanently. He also knows that the opposite would mean cutting the branch he is sitting on while trying to undermine the Chinese economy. Trump is a businessman who claims to be very good at bargaining, moreover, he is an extremely self-confident megalomaniac, but he is not stupid! In his first term, he knew how to extract many concessions from his rivals by using these tariffs as a bluff and a trump card. After weeks and months of negotiations, he reached agreements by obtaining significant concessions from both China and the EU in his own way. He is doing the same now. There is no difference in method, if anything, he has raised the stakes much higher this time, because American imperialism is on the offensive and, contrary to what is claimed, far from being defeated, it has even gained positions in various areas. Moreover, not only on the issue of tariffs, but also in all the rhetoric of withdrawing US troops from Europe, leaving Europe to its own devices militarily, withdrawing from NATO, etc., the same bluff element exists.

Trump conducts imperialist competition in many areas with open warfare as well as bluffs, blackmail, and sometimes retreats. But he does not allow any retreat in attacks on the working class, the plunder of nature, and steps that deepen the environmental crisis. Within a few months of taking office, he laid off hundreds of thousands of public employees. Real wages are constantly decreasing. Thermal power plants are being reopened. Environmental laws are being abolished. All these steps are taken in line with the interests of capital. And the events show over and over again that the working class has no recipe for salvation other than overthrowing capitalism.