ALARM is spreading among US imperialism’s imperialist rivals at incoming US president Donald Trump’s pledge to make ‘America Great Again’ by pauperising the whole world through policies of isolationism and global protectionist trade tariffs, principally aimed at China, its ‘allies’ in Europe and the UK and other industrialised economies.
Engulfed in a global and insoluble debt crisis, imperialist nations are faced with a fight to the death to avoid economic bankruptcy by civil wars against ‘their’ working classes.
From day one of his presidency, Trump has vowed to impose an extra 10% levy on China and hammer allies Canada and Mexico with proposed tariffs of 25%.
He has said: ‘On January 20, as one of my many first presidential executive orders, I will sign all necessary documents to charge Mexico and Canada a 25% tariff on ALL products coming into the United States and its ridiculous open borders.’
He has immediately gone for his biggest trading partners and he has gone for 25%,’ says Professor Stephen Millard, deputy director at the National Institute for Economic and Social Research. He adds that the announcement should serve as a wake-up call for Europe.
‘You can be sure that Europe will be hit pretty quickly. If he’s gone with 25% on Mexico and Canada, why not 25% on Europe?
‘Where you’re more likely to see the retaliation is, of course, from China. It just makes absolutely no sense to me,’ says Millard, adding: ‘Canada is a big ally of the US and there is a lot of trade that goes both ways.’
The economies that are probably most at risk from tariffs are economies that run big trade surpluses with the US whereas Britain buys more from the US than it sells – unlike the EU.
Should Trump seek to expand his wave of tariffs, Millard says the big question is how other countries respond.
‘The worry is that things could ratchet up,’ he says. ‘If the US does something and then there’s a lot of retaliation and then the US goes further and the other countries retaliate further – that is what I would call a trade war.’
Figures show that Vietnam, Germany and Japan are among the countries with the largest trade surpluses with the US, excluding China and Mexico.
Although the US is China’s largest export market, China is much less dependent on the US than Canada or Mexico. The US makes up around 15% of China’s exports, whereas that figure is closer to 80% for both Canada and Mexico.
If China responds in kind with stronger tariffs and the US expands its levies to other countries, as expected, then there is a risk that Britain will be caught in the middle and squashed.
If Europe is hit with tariffs from both the US and China, then it is likely that it will be pushed to impose its own, sparking price rises and inflation for households across the board – including in the UK.
‘We could be in a position where those three, very large blocs have cut themselves off from each other,’ says Millard. ‘That would be a very, very bad outcome.
‘Tariffs mean price rises for households. The stuff you import is more expensive. If you stop importing, then you have to produce things domestically and that is more expensive.
‘We really do not want to get into a trade war because everybody loses.’
According to the Centre for Economics and Business Research, Trump plans to impose levies of 60% on Chinese products sold to businesses and 20% tariffs on all other imports, which could blow a £20bn hole in the UK economy.
What does all this mean for UK capitalism which is facing growing calls to pick a side?
On Friday, Stephen Moore, a senior economic adviser to Donald Trump, said the UK should align itself with the US and warned that the US would be ‘less interested’ in a free trade deal with the UK if it sided with Brussels.
On Saturday, Pascal Lamy, the former head of the World Trade Organisation, advised that the UK should side with the EU as it does three times more trade with Europe than the US.
However, there is no way out of the crisis for the UK and capitalism. It is the working class that holds the key. It must organise the British and World Socialist revolutions to smash capitalism and imperialism and bring in the World Socialist Republic!