When Donald Trump strutted back into the White House for his second term as president last year, he and his advisors had plans, big plans, for reshaping American capitalism.

On so-called “Liberation Day,” April 2, 2025, Trump announced his “historic” “declaration of economic independence” from the world market. The instrument for achieving this was to be unilateral—mislabeled “reciprocal”—tariffs against all other countries. Trump imposed a blanket 10% tariff on the world beginning April 5, with higher tariffs against selected countries kicking in four days later.

The day after his announcement, the stock market crashed.

Capitalist opposition

Criticism of this wave of tariffs from other wings of the ruling class arose swiftly, if toothlessly. Trade experts complained that the formula used to calculate tariffs was faulty, based on inaccurate data, and overly broad. Others pointed out that the cost of the tariffed goods would inevitably be borne by consumers as prices rose. Congress dithered, and held hearings.

Trump initially held firm in the face of the stock market collapse. But within days, panic spread to the bond market. Investors dumped US treasuries, pushing up the interest rate on the national debt. Currency markets soon followed, with speculators racing to exchange US dollars for Euros, Swiss francs, and other currencies. Summing up the situation, the Financial Times quoted one Wall Street portfolio manager: “Good old capital flight.”

Fearing the consequences of capital flight, Trump backed down. He postponed the blanket assault, and shifted toward negotiating specific tariff rates with various trade partners. This settled down the markets and soon yielded new highs in stock prices.

As markets stabilized, the capitalist opponents of Trump’s global trade war looked to the courts to strike down what remained of his tariff regime.

The key court challenge zeroed in on the legal basis of the Liberation Day tariffs, arguing that the International Emergency Economic Powers Act of 1977 does not authorize the president to impose tariffs. In August, a federal court agreed and so, in February, after ten months of legal wrangling, the Supreme Court quashed the tariff plan. In response, Trump imposed a temporary 10% across-the-board tariff under the auspices of a different law, the Trade Act of 1974.

Importers are now suing to recoup $166 billion handed over to the federal government for Trump’s now-invalidated tariffs—a potential profit windfall that is unlikely to be passed on to the consumers who actually paid the duties.

Economic sleight of hand

Trump’s main goal was to revive American manufacturing, which can no longer compete with Chinese industry. “Jobs and factories will come roaring back into our country,” he promised.

Rather than an economy “roaring back” with well-paid factory jobs after Liberation Day, 113,000 manufacturing jobs were lost in 2025. 7,000 more were lost in the first two months of this year. Combined with other sectors like construction, mining, and logging, there have been over nearly 190,000 blue-collar layoffs since last April.

While manufacturing jobs aren’t coming back, the costs of tariffs to the working class continues to grow. According to the Tax Policy Center (TPC), “Tariffs announced by the Trump administration through December 4, 2025 will impose an average burden of about $1,230 per tax unit (or household) in calendar year 2026,” with a greater percentage increase on the lowest incomes.

On March 18, Federal Reserve Bank chair Jerome Powell confirmed what many had suspected: the inflation eating away at Americans’ standard of living “largely reflect[s] inflation in the goods sector, which has been boosted by the effects of tariffs … For many years, [goods inflation] was negative. The year before tariffs came in, it was zero, and it’s running at like two percent now.”

Indeed, the US Treasury Department reported that tariff income to the federal government increased from $79 billion to $264 billion year to year as of December 2025.

Trump claimed that the costs of tax cuts and increases in military spending would be covered by this economic sleight of hand, but reality has proven different. Trump’s proposed increase in next year’s military budget, from $1 trillion to $1.5 trillion, is nearly double the tariff revenue. And last month, the Pentagon requested $200 billion additionally to fund the US war on Iran.

US economy on the edge

On the anniversary of Liberation Day, the US economy stands poised on the precipice of disaster.

Far from his stated goals of balancing the budget, creating jobs, and “ending forever wars,” US national debt has grown to a record $39.1 trillion, 92,000 jobs were lost in February, and the US-Israeli war on Iran has unveiled the weakness in the US military’s power to achieve quick, decisive victories.

The cost paid by US workers is turning public opinion against the Trump regime. Rising oil prices have rocketed the average US price of gasoline higher by one-third in three weeks, with the price widely expected to hit $5 a gallon in the coming weeks. As those financial hits begin to register fully in the minds of millions of American workers, political turmoil is being prepared for the entire capitalist regime, not just the Trumpists.

Trump’s Liberation Day stands exposed as a fraud and a swindle. Our real liberation day will come once the working class majority has organized itself into a party to take the power out of the hands of these monsters and has begun the socialist transformation of the United States, and then the world.

From the Archives, The Communist #13: What We Said about Liberation Day a Year Ago

We’re living through history’s greatest and most terrible trade war. It differs in form from an imperialist shooting war, but the underlying goal is the same. Two ruling classes, the American and Chinese, are locked in a struggle for control of labor, raw materials, and markets.

Lenin’s succinct summation of World War I applies equally to today’s trade war. It is a “war between the biggest slave owners for preserving and fortifying slavery … ”

The capitalist class spent the last 30 years enriching itself to a degree no previous ruling class had ever dreamed of. Now the consequences of their greed are coming back to bite them, and they’re preparing to make the working class pay a brutal price.

Like a blood-sucking parasite engorged to the point of paralysis, corporate America suddenly realizes their decades-long orgy of money making went too far. In their relentless pursuit of cheap labor abroad, they deindustrialized the US economy. And in their unquenchable thirst for cheap credit, they created a mountain of debt that is now teetering on the brink of avalanche. America’s privileged position as the financial AAA standard of the world market has never been in greater jeopardy than at the present time.

In the era of free trade and globalization, the ruling class made workers pay through shuttered factories and an epidemic of addiction and despair. Now that globalization is in reverse, they will make us pay through more job losses and higher prices.

To distract us from this fundamental fact, they want to whip up national chauvinism. “The Chinese are to blame for your rotten lot in life,” they say. It’s the same crooked and cynical tactic warmongers have relied upon throughout history …

Communists have always condemned wars between nations as barbarous and brutal. Our position on the trade war is no different. Tariffs and trade barriers will not reopen factories, raise wages, or bring down the cost of living. You won’t find the enemies of the working class in Shanghai or Beijing—they’re right here at home: the American capitalists. Against their trade war of nation against nation, we must wage a war of class against class.

…

The largest trade war in history, now unfolding, is an object lesson in the absurdity of capitalism … In the process, half of the world’s productive forces will be pitted against the other half. The world’s technology, scientific expertise, supply chains, and division of labor will be wastefully torn apart.

In effect, Chinese capitalism has become too advanced for the limits of the world market. Its manufacturing sector is too strong, too efficient, too sophisticated. Its industrial infrastructure and global supply chain are too integrated and precise. A third of the world’s physical products are now made in China. The output of a single industrial region now satisfies global demand for goods like steel and solar panels.

These advances in the productive forces are colliding with the narrow limits of capitalist profit-making. At humanity’s finger tips is an immense technical capacity that could be harnessed to shorten the working hours of the global workforce, feed, house, and educate billions, eradicate diseases, and live in abundance. Under capitalism, all of this progress is converted into grounds for a conflict on the scale of a new world war …

The predicament facing American capitalism is one of the starkest contradictions of our time. The world’s richest nation has subjected its working class to an increasingly unbearable quality of life for half a century, while its ruling class rested on its riches, confident it would dominate the planet forever. US capitalists closed down over 90,000 factories between 1997 and 2020. Since 1997, idle corporate cash assets grew from $1.3 trillion to an all-time high $8.2 trillion last year. Now, they want American workers to wave the red, white, and blue, while venting their boiling frustrations at “foreign cheaters” like China.

Meanwhile, for the last 30 years, Chinese capitalists have done what American capitalists refused to do, partly as a result of heavy-handed state compulsion: they invested in improving productive technique. Slowly but surely, they overtook US industry in one sector after another …

The cheap consumer goods that “took the edge off” for the last 30 years are coming to an end—but the jobs are not coming back. The globalization era was a disaster for workers, but protectionism will be no better … There is only one off ramp from the coming madness and misery. The exit is called socialist revolution, and the chance to take it is approaching.