THE WORLD’S stock markets fell dramatically on Tuesday following US president Donald Trump’s latest move to ratchet up US capitalism’s trade war with China to the point where it threatens to crash world trade and the global financial system.
Trump has already imposed 25% tariffs on $50 billion worth of Chinese goods, boasting at the time that he was confident the Chinese government would back down. When China refused to cave in as he predicted and retaliated by announcing that they would impose their own tariff increases on American imported products, in particular agricultural items such as soya beans and cars, Trump made good his threat to escalate the war.
On Monday, Trump announced that he had instructed US trade officials to identify Chinese imported goods to the value of $200 billion on which he intends to slap a 10% tariff increase. He also threatened that if China continues to fight back then he was prepared to go even further and increase tariffs on a further $200 billion worth of Chinese goods – effectively a massive increase on the price of virtually all Chinese imports to the US.
So far, Trump has been careful to target Chinese imports that are seldom bought by US workers, trying to avoid massive increases to the average American consumer. This latest round however will hit US workers squarely in the pocket, driving up the cost of living for a working class that is already suffering from low wages after years of austerity.
In addition, the Chinese tariff increases on agricultural produce from the US will hit the farming community hard, wiping out many small farmers who, according to the popular press, represent Trump’s core supporters. This has led financial commentators to wonder why on earth Trump has launched a trade war that will damage his political support.
Moreover, a trade war that actually threatens to destroy major US companies like the giant Apple Corporation, who make all their phones in China, along with all the other US companies that flocked to the country for cheap, skilled labour, and are vulnerable and will crash if China retaliates in kind. This is precisely what the Chinese government has threatened following Trump’s new escalation, warning that China would ‘have to adopt comprehensive measures combining quantity and quality to make strong countermeasures’.
At the same time as Trump is driving trade war with China, he is carrying out the same war against former allies in Europe and Canada; indeed the entire world is now the enemy of US capitalism. Two weeks ago, the World Bank issued its strongest warning yet of the consequences of Trump’s trade war on the world saying that it would have consequences equivalent to the banking crash of 2008 as world trade seizes up, companies go bust and stock markets collapse.
In fact, the coming crash will dwarf the banking crash of 2008, especially if the Chinese government uses its economic ‘nuclear’ weapon. The US is in debt to China to the tune of over $1.18 trillion in the form of US treasury bonds which the government sells in order to borrow money.
If China dumps its bonds on the market it would crash the dollar and along with it the US economy.
What is clear is that all Trump’s talk about defending US jobs is a pack of lies promoted by him out of fear that the US working class will rise up in a civil war against capitalism and he hopes to pacify them with the promise of jobs at the expense of workers in other countries. This is doomed to failure. The escalating trade war will, as the World Bank predicts, lead inevitably to financial and industrial collapse on a scale never seen before.
What is clear is that world capitalism is plunging rapidly into a historic crash that the capitalist class are determined will fall on the backs of workers in every country. There is no solution to this crisis except for the working class internationally uniting to deal with it by putting an end to the anarchy of bankrupt capitalism on a world scale through the victory of the world socialist revolution.
