Trumpian Logic

Trump really believes in tariffs. He has believed, for decades, that ‘free trade’ is a myth, serving to conceal a reality in which other countries are taking advantage of the US. 

In the era in which free trade reigned supreme, these ideas were on the extreme margins of mainstream debate. But as the consensus around free trade and free markets has broken down, Trump’s view has gained traction, especially in those left-behind communities who lost out in the era of globalisation. In fact, Trump’s attacks on neoliberal trade are core to building into his political coalition a part of working-class America which has voted Democrat for a long time.

Trump leans into the idea that tariffs will help rebuild the industries that gave previous generations of Americans good, unionised jobs. And certainly some types of tariff policy can play a role in nurturing and protecting industry. But they will not achieve this on their own. To rebuild industry you need to be targeted. Tariffs need to be one part of a strong industrial policy.

That’s not what Trump is interested in. Instead, he sees tariffs serving two goals.

First, Trump hates income tax. He dreams of the United States as it was in the nineteenth century, when income tax didn’t exist, and a group of industrialists and financiers monopolised new technologies to become wealthier than anyone in history. The ‘robber barons’ back then used that wealth to protect their monopolies and buy political power. 

Contemporary politics already resembles this ‘Gilded Age’ in many important respects — just look at the line-up of Big Tech oligarchs at Trump’s inauguration. In his first term, Trump gave the biggest tax cuts in history to the very rich. Now, those cuts are up for review, and he wants to make sure he can extend them without increasing America’s enormous debt.

Tariffs are his answer. Trump likes to claim foreigners will pay for this tax, and of course tariffs do, in a sense, cost foreign businesses lost revenue. But in terms of who actually pays, it will be ordinary Americans. This is, then, a form of highly regressive redistribution. 

The second reason Trump loves tariffs is that they allow him to wield a stick with which he can  demand tribute from foreign countries in the form of economic concessions. Some of these concessions have been on the agenda of American monopolies for many years. But the aggressive way Trump is pursuing his demands, together with the wholesale attack on China, show that he is attempting more than piecemeal changes. Rather he wants a full-scale reordering of the world economy.

Trump — or at least the people around him — recognise that the world is changing, from a unipolar to a multipolar world. They want to hold back the tide as much as possible, preserving US power while pushing the costs onto other countries, allowing them to grab resources at will, in what will become a world characterised by great power rivalry. The result would be a dismantling of the liberal ‘rules-based order’ and its replacement by a model based on bullying and backroom deals.

In all of this, Trump wants to enhance the power and wealth of the oligarchs, but he accepts that some short-term pain will be necessary. Of course, that does not mean he wants to undermine the wealth and power of his friends, nor his own popularity, with an all-out economic collapse. The howls from the financiers last week threatened exactly that, hence pushing him to reverse his more extreme tariffs. But it’s more likely a tactical move, rather than a strategic reset.

Globalisation’s Game

Globalisation was not a conspiracy against the US by the rest of the world. Quite the reverse. It was a project of Wall Street and America’s increasingly monopolistic corporate sector to remove all obstacles to their ability to extract and accumulate.

For US elites, one of the cornerstones of globalisation was that the actual stuff that Americans consume no longer needed to be produced in the US. It could all be made more cheaply elsewhere. To this end, a wide range of developing countries were told to run export economies, making stuff for the West. Because they were all told to do this at the same time, the price of many basic goods fell sharply, fuelling a consumer boom.

In the West, the result of this was a hollowing-out of manufacturing — not necessarily a bad thing for political elites, because it weakened the union movement. But there was a more fundamental bargain here.

First, in return for these cheap exports, global south countries bought US financial assets, including debt. This was a boon for Wall Street, fuelling the financialisation of the US economy.

Second, the US was happy to lose manufacturing dominance as long as it maintained control of the really valuable bits of the world economy, especially technological and financial dominance. From the mid-1990s, this was made explicit as the US pushed binding ‘trade’ deals, committing the rest of the world to implement tough intellectual property and investment protection rules. Under international law, sovereign governments would need to respect the privileges of US corporations.

None of this was without problems. Large trade imbalances do create problems, as we see in the American rust belt, fuelling inequality within countries.

Worse still for the US, China was not content to play the role of supplier of cheap goods forever. Ignoring many of the rules the US financiers had put in place, China began to develop into a real competitor to the US in terms of technology. China did not create globalisation, but it played the US at its own game, and in some sense, won. 

Trump is now using all tools at his disposal to rewire this system. Tariffs are one very important aspect. Threats to the US security umbrella are another. And, what might dwarf all of this, plans have been floated for a massive default on US debt and the introduction of capital controls. 

In terms of the more mundane economic concessions Trump is pushing, many of them have been promoted by US administrations for years now. A recently released 400-page document lists many hundreds of pet peeves from clean energy and deforestation regulations, public health rules, testing and labelling requirements aimed at public safety, and the now infamous food standards. Giving in to these demands means granting US capital even more power over what should be sovereign policy decisions.

The British government seems intensely relaxed about accepting some of these demands, even though we know there are high levels of opposition to things like US food standards, based as they are on the stomach-churning treatment of animals and intensive use of chemicals and antibiotics. This, after all, isn’t about importing more US products — it’s about importing the American regulatory model.

In particular, Britain is being told to ditch the special Big Tech tax — something it seems willing to do even as it cuts spending for international development and support for those with disabilities. It also looks set to drop elements of its online safety plan, proposals for proper regulation of AI, and controls on our use of personal data. Given US demands would likely make it much more difficult to support local industry and procurement, and impossible to place restrictions on participants in a market, this would all make building a UK tech sector far harder. It would be a huge shot in the foot.

All of this underlines that Trump’s actions are not a move away from a corporate-dominated economy, but one which shifts the source of that domination from a supposed rules-based order to the unmitigated rule of brute force. Many corporations have made their peace with this — just look at the way the once liberal world of Big Tech has shifted towards militarisation and authoritarianism, and moved away from climate action. Monopoly capitalism has become incompatible with any form of real democracy, so those with most wealth and power to lose jettison even the pretence of democracy in favour of fascism.  

The Alternative

It’s a grim picture. But there are opportunities. As we’ve seen, the liberal rules-based order really had one rule — the rule of the market. Worse, it was a rule which the richest got to break when they needed to, while the poorest had to live by it, come what may. We should not mourn the passing of such a world order.

Progressives have argued that policies like tariffs and capital controls are not the work of the devil, as they’ve been seen in the neoliberal world order, but policy tools that can be used well or badly depending on who is in charge. Today, even conservative think tanks are railing against the market. The US-based think tank Compass is urging the Trump administration to ‘supplant blind faith in free markets with a focus on workers, their families and communities, and the national interest.’

Rather than defend the status quo ante, we need to begin rethinking what a decent world economy would look like — pushing for economic coordination and planning between countries. They can make a start the right way by standing up to Trump’s tariffs. Keir Starmer’s idea that we can fly under the radar and avoid tariffs has already been proved wrong. It completely misreads the moment. China’s policy of standing up to Trump has proven far more successful.

This doesn’t have to mean matching tariff for tariff. We can be more targeted than that. The EU is already mulling a range of policy options which target the oligarchs — from restricting data flows, to flouting intellectual property rules, to restricting investments. We should welcome these moves, and not just as retaliation, but as necessary tools to build economies with vastly reduced dependence on US capital.

There is also a political opportunity here. Last week, Trump blinked because China refused to bow down and created the threat of an economic meltdown. If we stand together, we can cause him further problems — forcing him to make choices about which segments of his broad coalition he really backs, and splitting that coalition.

In the process, if we commit to a different sort of economy, we can win over many of the so-called ‘left behind’ by showing that it is us, not Trump, who are the real anti-monopolists. In Britain, the answer many people would support is not scrapping the Big Tech tax, but sharply raising it; not loosening corporate regulation, but tightening it — building, in other words, a world economy where we remove the immense power of the oligarchs who have won so much from this corrupt global economy, and who now stand right behind Trump.

We should remember, finally, that Trump cannot hold back the tide of geopolitics permanently. He can wrest concessions and make short-term gains, but the world is ultimately going to change. In this way, his policies spring as much from a position of weakness as strength.  

Trump is a howl of an Empire in decline. He can cause a lot of pain along the way. But we’re fighting here for the economy of the future. We have more opportunities in this moment than it can first appear.