Trump starts trade war with China

It’s been another busy two months in the life of the Trump presidency, as Steve Palmer reports.

The revolving door at the White House continues to spin at a dizzying pace, expelling former loyal Trump aides, and sweeping in their replacements, with startling frequency. The reclusive Communications Director, Hope Hicks, who never communicated, found herself on the way out after telling a Congressional committee that she told ‘white lies’ for Trump during his election campaign. Gary Cohn, Director of the National Economic Council and Trump’s chief economic adviser, resigned after disagreeing with Trump’s tariff policy (see below). His replacement is Larry Kudlow, a one-time Chief Economist at the investment bank Bear Stearns until he was fired in 1994 because of his cocaine habit. Kudlow has had no economics training and built a successful career as a conservative TV commentator and pundit plugging long debunked ‘supply-side’ economics – clearly ideal material for the White House team.

Rex Tillerson, former Secretary of State, who described Trump as ‘a f***ing moron’, learnt of his firing from Twitter. Tillerson’s successor is Mike Pompeo, an Islamophobic evangelical Christian, previously the CIA Director. Pompeo has described Iran as a ‘thuggish police state’ and demanded an end to the Iran nuclear deal. He is replaced at the CIA by Gina Haspel, who ran a CIA ‘black site’ prison in Thailand in 2002, and subsequently played a role in the CIA's destruction of tapes of the interrogation sessions of terrorism detainees. HR McMaster, the National Security Advisor, has ‘resigned’, being replaced by the fascist neo-con John Bolton, who fervently asserted that Iraq had ‘Weapons of Mass Destruction’ prior to the Iraq war, when he was a member of the Bush administration. Bolton has called for war with both Iran and North Korea. Clearly the Trump administration is shaping itself up to prepare for further war in the Middle East and on the Korean peninsula.

International aggressiveness is under way on a much broader front, with Trump’s trade measures. Claiming on Twitter that the ‘United States has an $800 Billion Dollar Yearly Trade Deficit because of our “very stupid” trade deals and policies’ – particularly with China – Trump announced he was slapping tariffs on steel and aluminium imports. In fact, the ‘trade deficit’ is about $500bn and Trump is confusing the trade deficit with the goods deficit (which does not include services – eg accounting, legal services etc – where the US runs a strong surplus). China accounts for only about 3% of US steel imports, whereas Canada (17%), Brazil (14%), South Korea (10%), Mexico (9%), Russia (8%) and other countries significantly exceed this share. Since the tariffs, initiated for supposed ‘security’ concerns, are universal, there was an immediate outcry from Canada, Mexico, Britain, the EU, Brazil, Korea and other countries that supply the US with steel and aluminium. Trump has now deferred a decision on tariffs on the EU until 1 May. The Chinese responded with tariffs of their own on pork, apples, nuts, steel pipe and other imports from the US.

Hot on the heels of the steel and aluminium tariffs, Trump unveiled further tariffs on $60bn of imports from China. The rationale this time was an attempt to punish China for its supposed ‘systematic theft’ of US intellectual property (IP) and to ‘reverse the loss of US factory jobs’. China is preparing a much more substantial response to this set of tariffs, which will target states with strong Trump support and significant companies which are important or strategic to the US economy (eg Boeing, the aircraft manufacturer).

The US imperialists object to China’s practice of ensuring that foreign investors do more than simply carry away fat profits; it insists that they also have to transfer technology and IP to China, as part of the price of doing business. A clear policy of this kind, intended to harvest the best of foreign technology and practices, means that foreign investment is not simply parasitic, but actually contributes to Chinese economic development. No-one is forcing US corporations to do business with China, just their own hunger for profits. To sign agreements, which include IP transfer, and then turn round and complain about them as a form of protectionism is the height of hypocrisy.

A trade war is under way, not because of Trumpian idiosyncrasies, but because the pressures of the world capitalist economy are pushing the hunt for profits to fresh extremes, with sections of capital fighting for survival at others’ expense – a battle for imperialist domination. Stagnant development has led capitalists to seek alternative sources of profit, such as investments in financial speculation. Another potential way of enlarging profits, or of reducing losses, is at the expense of the capitalists of other countries, an extreme measure which runs against the ideology of ‘globalisation’ and ‘free trade’. The fact is that US capitalism, although the largest imperialist, is being overtaken by other countries. The US does not hold a monopoly on advanced technology and other global rivals, such as China and the European Union, are stronger in certain sectors than the US. Growing competition for markets, raw materials and fields for investment are pushing all leading capitalist countries toward a trade war. Trump has somewhat jumped the gun, promoting the interests of the most backward sections of US capitalism at the expense of other US capitalists, who risk losing out from Chinese retaliation. They will be paid back in their own coin as China retaliates. We can expect this trade war to expand and deepen as Trump’s ‘Make America Great Again’ policies pit US imperialism against not only China but against other imperialists as well.

Fight Racism! Fight Imperialism! 263 April/May 2018