LEADING bourgeois economists are making doom laden predictions about the effect of Donald Trump’s pledges to ‘make America great’ through trade wars and expelling millions of workers from the US.
Yesterday, the Daily Telegraph published an article by its Deputy Economics Editor, Tim Wallace, headed ‘America’s economy “risks massive Trump slump” ’ and warned he is tipping the US into recession if he follows through with his promises made on the campaign trail.
Paul Mortimer-Lee of the National Institute of Economic and Social Research (NIESR), said Trump’s pledges to impose massive tariffs on foreign imports to the US, expel millions of ‘illegal immigrants’ while making tax cuts to the rich paid for through spending cuts was ‘ill-considered, rushed and damaging’ and would ‘likely tip the US economy into recession.’
He warned: ‘In the worst case scenario, where immigrant expulsions are massive, tariff increases hit straight away and retaliation is swift and effective, GDP could contract by two to three percentage points.’
While two to three percentage contraction in the total wealth (GDP) generated by the US may not appear a great amount to people, for economists like Mortimer-Lee a contraction in the most powerful capitalist economy in the world it marks a ‘massive slump’ and a dive headlong into recession for America.
Trump’s pledge to expel five million workers ‘could reduce GDP by close to 2.5%’ he said, adding that the reduction in GDP ‘would be persistent – not a one-off shock like tariffs’.
Slashing the workforce by millions as Trump promises would hit industries like agriculture, retail and construction driving up their costs and sending inflation through the roof.
Trump’s plans to bring in massive tariffs on foreign imports, ranging from 20% to 60% in the case of China, will similarly hit the pockets of US workers and the middle class.
Despite Trump’s boasts that other countries would pay the cost of these tariffs, they will be paid for by US companies that rely on these imports – costs that will be passed on by increased prices, again fuelling inflation and driving up the cost-of-living for workers.
Wallace warns that: ‘A recession in the world’s largest economy would send shockwaves across the globe, with China, Mexico, Canada and Germany all likely to struggle given their deep economic links to the US.’
That underestimates the catastrophic hit that Trump’s trade war will inflict on the world, especially on Europe, where the Eurozone countries have relied on Germany as the strongest economy to prop up the rest.
Germany, whose economy has been reliant on manufacturing, especially its dominant car industry, is already in the throes of economic meltdown with the once mighty VW car company planning to close three of its giant plants for the first time in its history laying off thousands of workers.
In France, the government collapsed last week, with its prime minister forced to resign after being unable to push through an austerity budget designed to cut 60 billion euros (£50 billion) of government spending in an attempt to bring down France’s record national debt of 3.228 trillion euros.
With the EU collapsing in economic and political crisis, Labour chancellor Rachel Reeves yesterday met with finance ministers in Brussels to call for a ‘closer economic relationship’ with the European Union.
Reeves called for a new relationship with the EU that instead of divisions ‘focused instead on all that we have in common.’
What they all have in common are bankrupt economies that have piled up national debts that the bosses and bankers are insisting be dealt with by making the working class pay through wage cuts, slashing social benefits and mass unemployment.
Huddling together with the EU in a union of bankruptcy while the capitalist world crashes in a wave of economic depression and slump is the only solution for Reeves and the Labour government.
For the working class in the US, UK and EU the only solution is to organise its strength to put bankrupt capitalism out of its misery by taking power and going forward to socialism.
Now is the time to build sections of the International Committee of the Fourth International in every country to organise the victory of the world socialist revolution.
