Trump’s Tariffs and MAGA Capitalism
As Trump’s tariffs reverberate around the globe, Kieran Allen analyses what lies behind them. He argues that the attempt to mobilise the state to revive US fortunes sharpens tensions between different states and increases the threat of war.
Trump has a ‘common man’ style that few world leaders have. At his recent ‘liberation day’ press conference, where he announced ‘Trump’s tariffs’, he called a retired car worker, Brian Pannebecker, to the podium; he complimented his Agriculture Secretary, Brooke Rollins, on reducing the price of eggs. Yes, the price of eggs is a big deal for many.
The global experts call him an ‘economic illiterate’. Doesn’t he know that the last time there was a trade war, it led to the great depression of the 1930s?
The economists are not entirely wrong. But the assumption that Trump is a ‘madman’ or doing ‘a solo run’ does not lead us to understand what is really happening.
US tariffs are motivated by three main concerns. Behind the bluster, there is a certain rationale.
Motivations Behind Trump’s Tariffs
First, Trump’s team are obsessed by the US’s decline and think it resembles the British empire before WW1. The US has a huge deficit ($1.9 trillion or 7% of its GDP); it has a declining share of global manufacturing (17% versus 30% for China); and the US fears losing the battle for new technologies – AI, EV cars and solar panels, for example. Trump’s tariffs aim to bully the rest of the world into subsidising a revival of the US economy. The main target is China which faces tariffs of over 50%, but also countries like Vietnam where a third of its investment is from China.
But what about tariffs on friendly countries like the EU? Trump wants to force open new concessions for US capitalism. He wants the EU to pull back from its decision to only buy arms made in the continent and buy US weaponry instead. They must not impose a digital tax on US tech companies. They must join in his economic war with China. This is why countries have been given 60 days to negotiate concessions.
Second, Trump is concerned about the hegemony at home. There is a strong anti-corporate sentiment in America, as distinct from anti-capitalism. Everyone knows of the gross inequalities but tolerated them when it offered good jobs. Not anymore. US workers often work seven days a week and 9 million people do multiple jobs just to survive. Trump wants to give his billionaire friends extra tax cuts, so he needs to create a nostalgic vision of American greatness.
Back in the 1960s, auto workers used to have decent wages, pensions and health benefits. Hence the appearance of Pannebecker, a racist goon and long-time Trump supporter who masquerades as a ‘real worker’.
Third, the tariffs signal the end of Atlanticism. During the Cold War, the US was the global leader of Western capitalism. This coincided with a ‘golden age’ when prosperity made possible a compromise between labour and capital. The US played an active role in promoting this compromise by training leading politicians, re-shaping trade union politics and, crucially, establishing 750 military bases in 70 countries. It sometimes even promoted a vaguely ‘progressive’ ideology.
Today, its economic decline complicates this. It needs to pressurise its allies to give it more – and if they do not comply, they face punishment. The new ideology is support for the far right and so-called ‘patriots’.
The MAGA Movement
Marx described the state as the ‘management committee’ of the rich. This, however, does not mean that the wealthy are always unified. How else could we explain the sell-off of US stocks in the aftermath of this announcement?
Like every committee, there are always grievances between the ‘rank and file’ and its officers. This is especially so when corporate CEOs are in competition with each other. The state seeks to mesh their interests together, to articulate and develop strategies for common national interests. This will sometimes involve major arguments with some, or even a majority, of corporations.
In the US, the MAGA movement has effectively taken over the state. It wants to impose a new strategy on US capital which involves a break with the past. The last model meant that US capital constructed supply chains across the world based on cheaper labour. While elements of this will continue, a new model involves using the power of US state – and its military – to force other countries to subsidise its revival. Hence the rows within the US elite.
The Effects of Trump’s Tariffs?
Will it work? Unlikely. Trump’s tariffs are a crude instrument. They will lead to higher inflation as corporations pass on taxes on imported components or finished products to consumers. US domestic companies will then match these higher prices with their own. The American worker, promised a dream, will be the first to suffer.
Moreover, if there is some retaliation – and wider Western ruling classes are debating this – it will spark a trade war which could lead to a global recession. There are also other knock-on effects. Already, the EU is worried that China will seek to access its markets, so they are proposing new tariffs on them.
The US, however, is a much weaker power than in the past and its ability to act the bully can be challenged. Even during the current business cycle, it imports just 13% of world imports. Other capitalist powers will seek new markets and possibly look for alternatives to the dollar as a reserve currency.
Trade Wars and Military Wars
The re-assertion of US economic power is closely tied to the issue of security and defence. Scott Bessent, the US Treasury Secretary, has spelled out the link. He wants the US to set up a ‘security zone’ where tariffs are configured according to a country’s attitude to the US. There would be a green zone for those who share the same values, currency and defence, a ‘red zone’ for hostile countries and a yellow zone for those who ‘grandstand’ against US policies but are not yet in the enemy camp. In other words, global protectionism is intimately linked to military build-ups.
The strategy of using state power via Trump’s tariffs to do this is a sign that we are in a 1930s style period. There is a difference though. Unlike then, the big powers today are armed with nuclear weapons. There is a climate crisis where global co-operation is required. When the nostalgic fantasies do not work out, causes can easily be found for new wars.
There is, however, a silver lining in all this for the left. The trust that many people have in global leaders is being shattered. They are exposed as split, divided and full of bluster. Nationalist espousal of ‘our’ interests makes less sense when it is the mega wealthy or the EU bureaucracy who are extolling it. Capitalism is unveiled as corrupt, without principle, divisive, full of hate. We need to talk more and more about how capitalism is well past its sell-by date.
