Trump and the sharpening global trade war

In reaction to the arrival of Donald Trump in the White House, the media in the rest of the world, and the spokespersons of “liberalism” in America itself, painted a grim picture of a planet soon to be plunged by Trump into the throes of a protectionist catastrophe such as already happened after 1929. The assumption was that protectionism is the programme of political “populism” in general, and of Donald Trump in particular. Already at that time, in our articles about populism and about the election of Trump, we argued that a particular economic programme (protectionist or otherwise) is not a major characteristic of right wing populism. On the contrary, what characterises this kind of populism, at the economic level, is the lack of any such coherent programme. Either these parties have little or nothing to say on economic questions, or – as in the case of Trump – they demand one thing one day and its opposite the next. Although Trump in power has already proven his penchant for “unilateralism” by threatening or beginning the withdrawal of the United States from two of the most important trade agreements: that of NAFTA (with North America) and TPP (with Asia without China). In the first case, this remains a threat and one that will be opposed by many important US companies. In the second, the actual agreement has never been signed so a formal withdrawal by the US is not necessary. At the same time Trump has suspended the TTIP negotiations with the European Union – his intentions in so doing remain unclear. According to his own claims his goal is to impose a “better deal” for America. Throwing in the whole weight of the United States to pressurise the others, Trump is gambling with high stakes, as we predicted he would. The outcome remains unpredictable. What is clear however is that, at the level of economic policy, the ruling classes of the other countries have profited from the protectionist rhetoric of Trump in order to one-sidedly blame the USA for something which is first and foremost a product of global capitalism. What we have witnessed recently is nothing less than a qualitatively new stage in the economic life or death struggle between the leading capitalist powers - something which had already started before Trump became president. And at the same time as the other governments issue loud statements in “defence of free trade” against Trump, in reality they have all begun to adopt his rhetoric against dumping and for “free but also fair trade”. Once a slogan of NGO's, “fair trade” is today the war cry of the bourgeois economic struggle. Protectionism is neither new nor the monopoly of the USA. It is part of capitalist competition, practised by all countries.

Formal market protectionism however is only one of the forms which this conflict takes. Another one is the weapon of sanctions. The economic sanctions against Moscow promoted above all by the United States are aimed against the European economy almost as much as against the Russian. In particular the recent American renewal and sharpening of these sanctions (imposed by a coalition of Democrats and Republicans, against the will of the president), openly put into question new oil and pipeline deals by western Europe with Russia, and have provoked a storm of protest, above all in Germany. Already under Obama, the American bourgeoisie had also begun to legally prosecute German companies operating in the United States such as the Deutsche Bank and Volkswagen. It would not be an exaggeration to speak of an offensive American trade war against Germany, first and foremost against its car industry. We do not doubt for a moment that the likes of VW or Mercedes are guilty of all the dirty tricks they are being accused of (centred round the falsification of pollution controls). But this is not the main reason they are being prosecuted, and the proof is that other “culprits” are hardly being affected by the legal procedures.

Although Trump, unlike his predecessor, has for the moment not taken such measures, he continues to massively threaten, not so much Europe, but above all China. From his point of view, he has good reason to do so. Already at the economic level, China is presently mounting two gigantic threats to the interests of the United States. The first of them is the so-called new Silk Road, a massive infrastructure programme aimed at linking southern Asia, the Middle East, Africa and Europe to China through a vast system of modern railways, highways, harbours and airports by land and by sea. Peking has already pledged a thousand billion dollars to this, the most ambitious such infrastructure programme in history to date. The second threat is that China (but also Japan) have started to withdraw capital from the United States and the dollar zone, and to establish bilateral agreements with other governments (the so-called BRICS states, but also Japan or South Korea) to accept payment in each other's currencies instead of paying with dollars. Although there are of course objective limits to how far China and Japan can go in this without harming themselves, these moves represent a serious threat to the United States: “Sooner or later, the currency markets will mirror the relation of forces in international trade – meaning a multi-polar order with three centres of power. In the foreseeable future the Dollar will have to share its leading role with the Euro and the Chinese Yuan” (...) That will affect not only the economy and the social sector but also the military armament of the world power”[1]. This would indeed risk undermining, in the long term, the overwhelming military superiority of the United States, since it presently finances its gigantic military machine, and its state debt, to a considerable extent thanks to the role of the dollar as the currency of world trade.

Although both the United States and the European Union are threatening China with custom duties in response to what they call Chinese dumping, what they above all want to achieve is that Peking is stripped of its status, in the international economic institutions, of a “developing country” (which gives China many legal possibilities to protect its own markets). The element in the economic programme of Trump, however, which has most impressed the ruling class, not only in the United States, is his planned “tax reform”. The Frankfurter Allgemeine Zeitung in Germany declared that it would constitute – should it ever be realised – nothing less than a “tax revolution[2]”. Its main idea is not new in itself, but goes in the same direction as similar “reforms” in the “neo-liberal” era: that of taxing consumption rather than production as much as possible. Since everybody pays consumer tax, all such shifts constitute a kind of tax cut for the owners of the means of production. Convinced that the United States is the only major country where such a tax system could be imposed in a really radical manner, Trump hopes, by making production in the United States virtually tax free, to bring American companies, their headquarters now in places like Dublin or Amsterdam, but also some of their overseas production, “back home” - and to become more attractive for foreign investors and producers. This above all seems to be the counter-offensive which Donald Trump has in mind in the present stage of the economic war.

At the economic level, Trump is anything but the opponent of “neo-liberalism” which he sometimes claims to be. If anything, the goal of his government of billionaires is more like the “completion” of the “neo-liberal revolution”. Behind the rhetoric of his former adviser, Steve Bannon, about the “destruction of the state” there lurks the  neo-liberal state, a particularly brutal and powerful form of state capitalism. But the problem of the Trump administration today is not only that its economic programme is self-contradictory. It is also that those elements of his programme which could be of most use to the American bourgeoisie are very unsure of ever being put into operation. The reason for this is the chaos in the political apparatus of the leading ruling class in the world

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[1]Josef Braml: Trump's Amerika. Page 211. Braml works for the German Society for Foreign Policy (DGAP)

[2]Frankfurter Allgemeine Zeitung 02.04.2017. The FAZ newspaper is one of the leading mouthpieces of the German bourgeoisie.