THE crisis of the capitalist system erupted on Saturday with an opening salvo of explosive tariffs imposed by the US President Trump on his trade war rivals.
Officially, the rationale for Trump’s move is punishment for the trade in the synthetic opioid fentanyl, but it is widely seen as a legal pretext for ‘emergency’ action that would normally require a congressional decision.
Canada is the first to state that it will take on the USA and Trump. Canada’s Mark Carney insisted: ‘We will retaliate … dollar for dollar,’ saying Canada would ‘stand up to a bully’.
As a former governor of the Bank of England, Carney witnessed Trump on the world stage at G20 and G7 meetings first hand and has clearly concluded that the US leader only respects strength.
Tesla, the electric vehicle maker led by Musk, last week warned of the impact of tit-for-tat tariffs. In fact, a new global trade war has begun.
President Trump signed executive orders on Saturday, imposing 25% taxes on most imports from two of the country’s biggest trading partners: Canada and Mexico. Goods from China will be charged a 10% tax.
The tariffs take effect on Tuesday. Canadian crude oil will be subject to a lower, 10% tariff, which could mitigate the effect on US gasoline prices.
The import taxes will result in higher prices for a wide range of products, including fruits and vegetables, flat screen TVs, and auto parts.
The targeted countries are expected to respond with retaliatory tariffs of their own on US exports. Business groups started to react immediately after the announcement.
A trade group representing the liquor industry said the tariffs would hurt jobs. According to a joint statement by the Distilled Spirits Council of the US, the Chamber of the Tequila Industry and Spirits Canada: ‘Since the 1990s, trade in spirits in North America has been largely tariff-free, resulting in significant growth.
‘US-Canada trade in spirits increased by 147%, while US-Mexico trade surged by 4,080%.’
On Sunday, in coordinated statements from China’s foreign ministry and commerce ministry, Beijing denounced the tariffs and said China would take unspecified ‘corresponding counter-measures’.
The foreign ministry said China has taken steps to help the US deal with fentanyl, which it said was ultimately a US problem, and said the imposition of tariffs ‘will inevitably affect and undermine future cooperation between the two sides on anti-drug issues’.
Businesses and shoppers in the US have already started making contingency plans. Trade data released earlier this week showed a sharp rise in imports in December, suggesting some companies tried to stockpile goods before any tariffs take effect.
Some individual shoppers also tried to beat the tariffs. Personal spending on durable goods such as autos and televisions jumped in December, according to figures released on Friday by the Commerce Department. Mexico is a leading producer of flat-screen TVs.
The auto industry is expected to be particularly hard hit because it is highly integrated, relying on manufacturing in all three countries.
General Motors (GM) told financial analysts on Tuesday that it will shift some pick-up truck production out of Mexico and Canada if tariffs are imposed.
‘We are prepared to mitigate near-term impacts,’ said GM CEO Mary Barra, adding: ‘What we won’t do is spend a large amount of capital without clarity.’
China’s commerce ministry said the tariffs were a serious violation of World Trade Organisation rules, and said it would launch a legal challenge at the WTO. Canada has signalled it will take a robust approach to Trump.
As the trade war sharpens, millions of workers face losing their jobs or seeing their wages being savagely slashed.
There is only one way forward for the working class of the world. This is to rapidly build sections of the International Committee of the Fourth International worldwide, to organise the victory of the World Socialist Revolution.
Capitalism must be consigned to the dung-heap of history!
