US PRESIDENT Donald Trump’s tariff increases imposed on China, Mexico and Canada come into effect today but already this has set off a massive fall on stock markets across the world on Monday.
According to Russ Mould, director at the investment company AJ Bell: ‘The prospect of a full-blown trade war has spooked investors as they weigh up the prospect of a widespread retaliation by countries on the receiving end of Donald Trump’s tariff frenzy.’
Trump’s tariff frenzy is just the latest in a string of crises that have erupted in the past 12 days.
Last week $1 trillion was wiped off the value of America’s leading tech companies, driven by fears over the Chinese Artificial Intelligence (AI) rival DeepSeek which completely upended the once unshakable belief in America’s domination over AI technology, long touted as the economic ‘saviour’ of capitalism.
This massive crash in the shares of America’s leading tech companies – companies that had wallowed in tens of billions in investments on the strength of their claimed world mastery in the field of AI – prompted an even bigger financial revolt by the end of last week.
On Friday Goldman Sachs, the giant US multinational investment bank, released data showing that there had been a massive sell off of US stocks by hedge funds. These hedge funds were ‘shorting’, that is, selling US stocks in what amounts to betting that the stock market is on the verge of a huge crash.
According to Goldman Sachs, in January investors placed ten times more bets on US stocks collapsing than equivalent bets that shares in leading US companies would rise.
As economic commentators have noted, this represents a massive retreat by these hedge fund speculators who, last November, went on a wild spending spree buying up US stocks in anticipation of ever increasing profits.
As the Telegraph noted: ‘Hedge funds ploughed billions into so-called “Trump trades” in the immediate wake of the US elections in November, on expectations the new president’s tax cuts and tariff policies would boost America’s economy.’
Trump promised a ‘golden era’ for corporate America with aggressive tax cuts to the rich and giant corporations along with a bonfire of regulations, and all this accompanied by a tariff war to crush US capitalism’s enemies and rivals, especially targeting China.
This was shattered by DeepSeek which matches and exceeds anything produced by Silicon Valley for an investment of just $5.6 million, a feat achieved despite US sanctions on the sale of advanced computer chips.
With their expectations of a stock market boom shattered, these hedge fund multi-billionaires are now desperately seeking to make profit from selling off shares in US companies in a financial gamble that will shatter the lives of American workers and the middle class.
Tens of millions of workers rely on pension funds and 401(k)s – a scheme where a portion of workers’ pay is saved and invested for the future – which heavily invest in Wall Street stocks. The coming crash will wipe out all these savings at a stroke.
In addition, Trump’s tariff war on the rest of the world has provoked a response from Canada, which Trump insists must become the 51st state of America, with the immediate imposition of reciprocal tariff increases on a range of US goods.
With Trump at the weekend threatening to expand the trade war to EU countries, the hedge fund speculators who poured billions of dollars into his presidential campaign in the hope of massive rewards are now seeking to profit out of a stock market crash while the working class in the US and across the world is expected to pay the price.
Workers will never accept being driven back to the conditions of the ‘hungry thirties’ that followed the great Wall Street crash in 1929 when unemployment and starvation ruled across the US and Europe.
The only way forward is for the working class internationally to join together to take power and put capitalism out of its misery with the victory of the world socialist revolution.
This requires rapidly building sections of the International Committee of the Fourth International in every country to provide the leadership to organise the victory of the world socialist revolution.
