“WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!) BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID.” So said Donald Trump in a recent social media post about tariffs.
Sworn in for a second term, Trump has wasted no time, exercising his power with a vengeance. Within a month, he imposed tariffs on America’s top trading partners: 25% on Canada and Mexico, and 10% on China. And when Colombian President Petro showed just a hint of defiance—tariffs.
One by one, Colombia, Mexico, and Canada fell in line, and the tariffs were rescinded or delayed, bolstering America’s traditional sphere of influence. Only China, the main US rival, responded with retaliatory tariffs. Trump is playing with fire. What is he trying to achieve?
What is a tariff?
A tariff is a tax on imports. For example, a 25% tariff on steel means that when $100 of steel arrives in the US, the importer must pay $25 to the US government. Those costs are usually passed on to the consumer, who would now have to pay $125.
Theoretically, levying tariffs should encourage consumers to “buy local” by artificially raising the price of imported goods. In theory, this will boost demand for domestic production and create American jobs by making it more expensive to source materials, components, and products from other countries.
Tariffs are considered a “protectionist” policy because they aim to insulate weak domestic industry from stronger competitors on the world market. When capitalism was young, tariffs played a progressive role by protecting rising industries. Now, the process has gone in the reverse. It’s declining American manufacturing that requires protection.
Tariffs are a “protectionist” policy because they aim to insulate weak domestic industry from stronger competitors on the world market. / Image: Jschnalzer, Wikimedia Commons
What is a trade deficit?
The US has maintained a trade deficit in goods for the last 50 years. In the period after the 2008 financial crisis this deficit hovered around $400 billion, but today it is $945 billion. This means that the total value of goods exported from the US is nearly $1 trillion less than the total value of goods imported from other countries. In other words, the US is buying more than it sells, and ending up with a net negative in trade.
For Trump, this is an unacceptable swindle, and the US is effectively giving money away—$67.9 billion to Canada, $152.4 billion to Mexico, and $279.4 billion to China. He wants to put his finger on the scales and force them to pay their “fair share.”
What about free trade and globalization?
Since the fall of the Soviet Union, the apologists of capitalism have trumpeted the superiority of the free market over the planned economy. The upswing of capitalism in the last period was based on a massive expansion of credit and world trade.
In particular, the opening up of China to the world market introduced a vast pool of cheap labor for exploitation. US imperialism benefitted from battering down all barriers in search of profit. Now that US companies are losing out to competition from China and other rising regional powers in a contracting world market—Trump says it’s “unfair.”
Capitalism cannot overcome its contradictions, and that massive expansion of credit has been transformed into an untenable debt burden. The bourgeoisie are retreating into protectionist policies in the hopes that they can shield themselves from the worst effects of the crisis.
“The most beautiful word in the entire dictionary of words is the word ‘tariff,’” according to Trump. / Image: Gage Skidmore, Flickr
Is Trump alone in supporting tariffs?
“The most beautiful word in the entire dictionary of words is the word ‘tariff,’” says Trump. While he has a unique emotional attachment to tariffs, he is not alone in supporting protectionism.
Bush imposed tariffs on steel back in 2002. His successor, Obama, said, “I will go anywhere in the world to open new markets for American products. And I will not stand by when our competitors don’t play by the rules.” Likewise, Biden’s CHIPS and Inflation Reduction Acts were protectionist measures aimed at propping up US manufacturing.
Like anything affecting the fundamental interests of the American ruling class, there is a bipartisan consensus between the Republicans and Democrats. American industries can no longer compete on the world market, so they must be protected. Trump is taking this logic to its ultimate conclusion and accelerating the process of retrenchment.
Trump also seeks to use tariffs as a cudgel to beat other countries into submission, leveraging the sheer weight of the US consumer market to achieve his political aims. Biden also weaponized trade and finance during the Ukraine War in a failed attempt to isolate and punish Russia, but Trump is even more keen to rely on economic “punishment” rather than military force.
Will protectionism make America great again?
Bloomberg estimated that the tariffs on Mexico and Canada, combined with those on China, would have added 0.7% to inflation, delivering the typical American family of four a one-time hit of $3,342. In addition, the “supply shock” could have knocked 1.2% off of US GDP. Trump argues this is a “pain” US workers should be willing to endure to make America “great.”
In 1967, the US was the largest steel producer in the world, with 115 million metric tons. In 2024, that number fell to 79.4 million. China, by contrast, went from 14 million metric tons to over 1 billion over the same period. This, combined with more efficient technique, has led to plummeting American employment in manufacturing.
It’s no simple matter for companies to uproot their operations and invest billions of dollars to begin manufacturing in the US again. Capitalists do not invest to “create jobs” out of the kindness of their hearts. They will invest only if they feel that demand for a particular commodity is high enough and they can maximize profits from their investment.
In this period of declining capitalism, capitalists prefer to invest in unproductive speculation. Between 2003 and 2012, the S&P 500 companies used 91% of their earnings to buy back their own stock and in payouts to stockholders.
But even if they decided that the investment in new factories is worth it, that wouldn’t bring back high-paying, 1950s style union jobs. American workers would be forced to compete with cheap labor on the world market, bringing down wages across the US. At the end of the day, the less they pay their workers and harder they work them, the higher the profits for the capitalist class.
In 1967, the US was the largest steel producer in the world, with 115 million metric tons. In 2024, that number fell to 79.4 million. / Image: Kateryna Babaieva, Pexels
How would other countries respond?
If Trump’s tariff frenzy intensifies, other countries will retaliate, going after US imports with their own protectionist barriers. A trade war will lead to an overall drop in world trade and production, a recessionary spiral which in the long term could reduce global GDP by up to 7%—equivalent to wiping the economies of Germany and France off the map. In other words: a catastrophic economic depression and rising unemployment.
World trade could also continue, but with supply chains diverted away from the now less reliable US market and toward the BRICs economic sphere. This would leave the US more isolated against China and other rivals—with an analogous economic impact for US workers.
Other factors could render tariffs ineffective, such as foreign currency devaluation. Trump wants to weaken the dollar to make US exports more competitive. However, protectionism will strengthen the dollar—making American goods more expensive for the rest of the world. Trump hopes to square the circle: tariffs inflate the cost of foreign goods, but a strong dollar makes foreign goods cheaper to import, thus offsetting the tariff’s effect for US consumers in the short term.
No amount of financial trickery can resolve the underlying contradictions within the system. Trump promises to usher in a new “Golden Age” of American capitalism, but the trends are clear: there is no prospect of real productive investment.
Do communists support protectionism?
The globalization of the preceding period contained a massively progressive component. It increasingly linked together humanity’s productive forces into an integrated system. It allowed production to be based where resources were rich and accessible without wasteful shipping and other inefficiencies. But under capitalism, this is constrained by the narrow interests of the nation-state and the ruthless search for profits.
A reversal of this worldwide economic integration and division of labor will bring with it enormous waste: new supply chains, longer transportation routes, less efficient and duplicated efforts to produce the same goods. This fragmentation will only hurt the working class through higher prices, unemployment, poverty, imperialist conflict, and wars.
Communists support neither capitalist free trade nor capitalist protectionism. We fight for a democratically planned world economy that will allow humanity to harness its collective wealth and knowledge in a conscious way to meet our needs, not enrich the wealthy few.