US PRESIDENT Trump sharply escalated his trade war with China yesterday, more than doubling tariffs on $200bn (£153.7bn) worth of Chinese goods.
The US is now enforcing tariffs on Chinese goods of 25%. This comes as China’s top economic negotiator, Vice Premier Liu He and his delegation, arrived in the US on Thursday to engage in trade talks with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.
Rather than trade talks, his delegation was met with a trade war hit. In the lead-up to the talks and on the news of the increased tariffs stock markets across the world were hit hard and fell for four days.
On Thursday, when the UK’s FTSE 100 closed 1% down, Germany’s DAX also lost 1%. France’s CAC lost 1.5%, while Hong Kong collapsed 2.4% and the Shanghai Composite Index was down 1.5%. The US Dow Jones fell 0.6% by Thursday afternoon and on Friday fell another 0.5%, while the Nasdaq was down 0.4% on Friday.
Back in China, Commerce Ministry spokesman Gao Feng responded that China will not bow to any pressure, and warned it has the ‘determination and ability to defend its own interests’. The ministry issued an earlier statement vowing to take any ‘necessary’ countermeasures if the tax is implemented.
The escalating trade war has got the capitalist class quaking in their boots. The World Trade Organisation (WTO) has warned that trade war poses a bigger threat to the world economy than the 2007/08 global banking crash.
And a trade war paves the way to a slump, a financial collapse and then a shooting war.
In fact, in an extremely provocative move, the US has on two occasions in the last couple of weeks sailed its warships through the South China Sea.
And on the very same day that the Chinese came to Washington to enter trade talks, the US organised joint war drills with India, the Philippines and Japan in the first joint naval exercise of its kind in the South China Sea.
The vessels included Indian destroyer INS Kolkata and tanker INS Shakti, a guided missile destroyer from the US Pacific Fleet, Japanese aircraft carrier Izumo and the Philippines patrol vessel Andres Bonifacio, the US Navy said in a statement.
The South China Sea and its islands account for 12 per cent of global fishing and a route through which 30 per cent of the world’s trade passes, apart from yet untapped oil and gas reserves.
Trump’s ‘America First’ policy of protectionism is in fact an admission of weakness. US capitalism has become a net importer, rather than a net exporter. China’s nationalised economy has the edge on world production: it has enjoyed decades of planned growth, while the US is in sharp decline.
Furthermore, the US-China trade war actually threatens to destroy major US companies like Apple, 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 now vulnerable to Chinese retaliation in kind, or even expropriation, if the US beats the war drums too loudly.
The US has a debt to Gross Domestic Product (GDP) ratio of over 100% which makes it ‘state bankrupt’. Its debt is currently 108% of its GDP, which means that even if it uses its entire produce to pay off its debt, it still could not pay it off!
China also holds 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 will crash the dollar and along with it the US economy. The fact that up until now the Chinese leadership has propped US capitalism up shows the extreme limitation of the Chinese version of ‘Socialism in a Single Country’ where one state, a distorted version of the dictatorship of the proletariat, presides over two social systems.
What is coming thick and fast is a trade war, slump and a global economic and banking crash, the likes of which have not been been seen since the 1930s. This crash will drive forward the worldwide socialist revolution with the working class taking the power in Europe and the Americas, and restoring power through workers’ soviets in Russia and China.
There is not a moment to lose. We must build sections of the Fourth International worldwide to lead this historic struggle to its victory!