Trump’s tariff policy – declaration of surrender

By Ingar Solty

– [This article posted on August 29, 2025 is translated from the German on the Internet, https://www.isw-muenchen.de/online-publikationen/texte-artikel/5374-trumps-zollpolitik-kapitulationserklaerung.]

##### Trump’s tariff policy is an expression of the helplessness with which the US is responding to the global crisis of capitalism.

History is never the result of the will of great personalities – not even when it comes to a “very stable genius” (Donald Trump on Donald Trump). It was Marx who, in the late 1840s and early 1850s, applied the historical-materialist method he and Friedrich Engels had developed to contemporary history, against Pierre-Joseph Proudhon, Victor Hugo, and many other proponents of the great men theory, to show that historical structural processes and class struggles are responsible for decisions in the political superstructure and social ideology.

In this sense, Trump’s tariff policy is less a Trump phenomenon than a US phenomenon. What’s more, it was Joe Biden who quadrupled the protective tariffs on Chinese electric cars and solar panels from 25 to 100 percent during Trump’s first term (2017-2021). In addition, this protective tariff policy against China has a European counterpart. The EU decided on a similar measure last fall.

In their seminal work The Making of Global Capitalism, Canadian political economists Leo Panitch and Sam Gindin describe how the US government first reconstructed capitalism in the West and then recognized globalization as a means of successfully disciplining the record-breaking striking US working class through a new mobility of capital, while at the same time using the debt crisis in developing countries to undermine the more or less socialist anti-imperialist national liberation movements and force them into Western free-market capitalism. Since then, the mere threat of capital relocation has generally led to tax cuts and subsidies from the state and restraint on the part of the unions. So why is the US abandoning a system that has worked according to its rules for so long and paid off in the form of tributes from around the world – not least in the form of profits resulting from exchange into US dollars?

The West’s change of course raises questions: Is criticism of free trade now right-wing? Is defending it now left-wing? Criticism of free trade was and is actually left-wing. When, on January 1, 1994, the day the North American Free Trade Agreement (NAFTA) came into force, the uprising of the indigenous guerrilla group EZLN (Zapatista Army of National Liberation) began in Chiapas, Mexico, this event heralded the end of the “end of history” just five years after political scientist Francis Fukuyama proclaimed it. Subcomandante Marcos’ question – “Who must ask for forgiveness and who can grant it?” – was the wake-up call for a movement against neoliberal globalization coming from the Global South.

Globalization, which today seems to be coming to a unilateral end through customs policy, was then considered an inevitability that nation states were powerless to resist and to which, according to the mantra of neoliberal social democrats such as Bill Clinton, Tony Blair, and Gerhard Schröder, employers’ associations, and radical market foundations, one simply had to submit. Criticism at the time was directed at the foreign trade policies of the capitalist centers in the West: globalization, it was argued, amounted to informal imperialism. In fact, the West exploited the debt crisis in developing countries caused by the first (1973) and second oil crises (1979/80) and the radical increase in key interest rates by the US Federal Reserve (1979): it tied its emergency loans to trade liberalization, deregulation, and privatization in favor of Western corporations. A policy of empires, but without formal colonies.

The result was the deepened dependence of the Global South and the proletarianization of 100 million small and subsistence farmers. Since 1980, the global working class has doubled in size – far outpacing general population growth. The drama of world history is this: capitalist penetration leads to “surplus populations” because it destroys traditional ways of life without offering a place in the new profit-driven economy as a substitute. The West is sealing itself off from those who leave the Global South in search of work and prospects: the Mediterranean is a mass grave, the US-Mexican border a war zone.

Socialist economists developed various concepts to counter the ideology of free trade and promote the independent development of the Global South. These included Pan-Africanism and other regional integration projects, as well as Samir Amin’s concept of “delinking,” which calls for countries in the Global South to consciously detach themselves from the capitalist world economy.

In the West, this could be ignored for a long time. However, periodic, deepening financial crises in global financial market capitalism became more frequent and moved closer and closer to the center stage, culminating in the Enron and dot-com crises (2000/2001) in the US. At that time, the hour of globalization criticism also struck in the West.

So is Trump now the champion of this criticism of globalization and free trade? Or is the left today the defender of open globalization? The labor movement has traditionally rejected protective tariffs: on the one hand, because war can also be waged with economics, and trade wars have often been precursors to military wars. One example is the fragmentation of world trade after 1878, which led to an arms race and rivalry between the great powers for spheres of influence and colonial markets for goods and raw materials – accompanied by nationalism, chauvinism, and war ideology. On the other hand, Marxist leaders such as Clara Zetkin and Rosa Luxemburg rejected protective tariffs because they drove up the cost of living for the working class. At the end of the 19th century, trade barriers to protect agriculture, for example, were seen as an attempt to maintain the profits of large landowners despite the now globalized agricultural markets – at the expense of workers, for whom food prices became more expensive as a result.

So, from a labor movement and anti-imperialist perspective, are we against protective tariffs when they are imposed by our own powerful states in the West, but in favor of them when they allow weak states to free themselves from the pressure of imperialism? That is correct, but at the same time too simplistic. For it was a central tenet of the left’s critique of globalization that the nation-state was by no means powerless and in retreat or even at an end. The core of the groundbreaking analyses of critical international political economy in general, and those of Panitch and Gindin in particular, was that the state was the godfather of the globalization of capitalism, indeed that it had always been and still was its central actor. The only state that was weakened in these processes was the welfare state.

Against this backdrop, the right-wing critique of free trade contains a grain of truth and is therefore appealing to workers in industries that are weak in terms of competitiveness. The right-wing critique of free trade essentially argues that geographical areas where capital accumulates benefit from this activity. This is also a left-wing conviction. The goal of regaining democratic control over the economy is progressive for all regions of the world.

However, the left’s criticism of free trade refers less to the flow of goods than to the flow of capital, i.e., it targets the free movement of capital, its “structural power.” This is also because, in capitalism, regardless of who is currently in power, the state is a capitalist state insofar as its functions are debt-financed via the international financial markets and depend for better or worse on creating an investment-friendly climate for capital – otherwise there is a threat of an investment strike. The left-wing response is therefore not protective tariffs, but capital controls. These have been tightened in China, for example, while the People’s Republic exported cheap goods around the world.

Furthermore, right-wing criticism of free trade from a workers’ perspective fails to recognize that economic nationalism à la Biden and Trump may attract foreign direct investment, which promises jobs and growth. However, this is only on condition of subsidies and poor working conditions: capital goes where there are as few unions, low wages, and few regulations as possible.

In addition, right-wing criticism of free trade fails to recognize the extent to which the Western working class and its standard of living depend on the still relatively cheap imports of consumer goods from China and the Global South. Trump was elected by workers who are angry about inflation—but the trade war will drastically exacerbate inflation, as it has already done. Here, too, left-wing criticism is where it was with Zetkin, Luxemburg, and others.

At the end of the day, right-wing criticism of free trade fails to recognize the quality of international trade. The US current account deficits have in fact been the strength, not the weakness, of US imperialism.

In a dollar-dominated world system, the US was able to extract tribute from around the world, which it ultimately did not have to pay or had to pay below value. But this is precisely what economic nationalism sees as a losing proposition – with fatal consequences for the global economy and the proletariat.

So why are the US and the West going down this path today? How well prepared is China for this, and what are the consequences of the People’s Republic’s reactions? The protective tariff policy is an economic declaration of surrender. After China’s increasing competitiveness in key future technologies and in the manufacture of industrial goods had revealed the superiority of Chinese state interventionism over the austerity policies of the US and the EU, the Biden administration attempted to beat China with its own industrial policy weapons in the form of the Inflation Reduction Act and the CHIPS and Science Act, and the EU with its Green Deal, “NextGenerationEU” and the “EU Chips Act,” and Germany with the reallocation of the Corona Fund to the “Climate and Transformation Fund,” to beat China with its own industrial policy weapons.

There are many reasons why these strategies failed. Ultimately, it has once again been demonstrated that there are no solutions that can simply be adapted from a historically grown context, and that even the significant rehabilitation of the state as a crisis actor and the centralization of decision-making functions in the US and the EU cannot imitate the state planning resources of China and its Communist Party (CCP). In addition, neoliberalism has become so deeply ingrained in institutions, legal systems, constitutions, and social mentalities and ideologies that the attempt at green capitalist transformation and electric revolution in the West was bound to fail.

According to US Treasury Secretary Scott Bessent, the customs policy now aims, on the one hand, as under Ronald Reagan and Trump 1.0, to secure improved market access and tribute guarantees for intellectual property, not least for Silicon Valley tech companies, and, on the other hand, to attract capital from around the world with the US domestic market and local tax cuts and subsidies. In addition, the aim is to make the US dollar cheaper as a global currency in order to reindustrialize the US and reduce the current account deficit.

However, none of this applies in relation to China. What can be used as a means of blackmail against other countries—Bessent refers to this as a “negotiating tactic”—is an end in itself when it comes to China, whose rise the US government wants to prevent across all administrations. The model here is again Reagan and his policy toward high-tech rival Japan. US policy toward Japan resulted in several decades of stagnant growth, even deflation. In relation to China, however, the US is misjudging the balance of power and China’s capacity for retaliation.

China has responded to US tariff policy with retaliatory tariffs of 125 percent, export restrictions on rare earths, on which the US automotive and defense industries depend, import restrictions on Hollywood films, an import ban on Boeing aircraft, and special sanctions against US companies. The People’s Republic is demonstrating its strength. The CCP has systematically prepared for this moment with its immense state planning resources. Sure, the tariff policy is also hitting the People’s Republic hard in a situation of comparatively low growth, rising (youth) unemployment, and a smoldering real estate crisis. But there are signs that China holds the better hand.

The People’s Republic knew what to expect from a second Trump presidency. Anti-China rhetoric was already dominant in the 2016 election campaign. It was the far-right media mogul Steve Bannon who advised Trump to pursue economic nationalist policies that blame China for the industrial decline of the US. This helped Trump win the election in the so-called rust belt. Once in power, Trump 1.0 launched a trade war against China that was intended to cut China off from access to microchips that it cannot or could not yet produce itself.

The Chinese state has responded quite successfully to the US’s strategies to defend its supremacy and contain China’s rise: The decision to systematically invest in renewable energies and become independent of fossil fuels from the Middle East was linked to the US war in Iraq, which was intended to secure global fossil fuel resources against any competitors, including the EU, which was expanding eastward. The eleventh five-year plan (2006-2011) then saw the start of exponential growth in gigawatt production from wind and solar energy. By the beginning of the twelfth five-year plan (2012-2017), China had already overtaken the US, and by the end of the plan, it had also overtaken Europe. The foundations for China’s e-revolution had been laid, and with them the foundations for a foreign economic policy that increasingly focuses on the BRICS countries and the Global South and breaks away from unilateral dependence on the US and EU domestic markets.

China took the wind out of Obama’s military forward positioning with three measures: In 2012, the 18th CPC National Congress decided to strengthen the development of the domestic market, to which the anti-poverty campaign, which has created the world’s largest middle class with a total of 770 million people, is making a significant contribution. Even today, the CPC sees “new urbanization,” which is expected to bring about higher individual consumption, not least of public services, as a key antidote to the US trade war. With the Belt and Road Initiative adopted in 2013, China is not only increasingly shifting its trade routes to Eurasia, but also establishing its economic model in this economic area.