Could Trump’s tariff war reshape global capitalism? An interview with Marxist economist Sam Gindin

Sam Gindin is a former research director for the Canadian Auto Workers union and Packer Visiting Chair in Social Justice at York University. He is also the coauthor of The Making of Global Capitalism: The Political Economy Of American Empire (with Leo Panitch), In and Out of Crisis: The Global Financial Meltdown and Left Alternatives (with Greg Albo and Panitch), and The Socialist Challenge Today (with Panitch and Stephen Maher), among other works. 

Speaking with Federico Fuentes for LINKS International Journal of Socialist Renewal, Gindin breaks down United States President Donald Trump’s on-again/off-again tariffs, their impacts on US-led globalised capitalism, and what a working-class response could look like.

Could you set out the context for Trump’s tariffs?

For a good many US people, the past four or five decades have brought deepening frustrations. Trump’s populist response has been to ask why, if the US is the leader in the globalisation of the world economy, have US people borne such a disproportionate share of the burdens but received such an unfair share of the benefits. Tariffs are, for Trump, the critical instrument to correct this. 

This poses three underlying questions: is it true that US people have been getting the short end of the stick within global capitalism? Does the root of popular frustrations, especially of US workers, lie in trade relations or is it homegrown — in the gross inequalities, permanent insecurities, cutbacks in social services and general failures of governments and political parties to improve working-class lives? And, if the issue is current and future jobs, can tariffs alone solve this concern? 

There is a further factor to consider. The US empire has, over the past eight decades, been defined by its drive to universalise free trade capitalism. How then does Trump’s dramatic focus on tariffs affect the future of the US empire?

In light of the US empire’s role in universalising capitalism, logic suggests the US capitalist class would not support the breakdown of this global economic order, and therefore oppose Trump’s tariffs? 

US capital looked to Trump to give them more of the usual goodies — significantly lower taxes, reversing regulations on capital (limited as they were), further limits on social programs — while blocking any advances in union rights. Trump promised to impose high tariffs, but US corporations saw this as only performative; they did not think Trump was mad enough to implement this part of his rhetoric. 

Tariffs do not just limit non-US capital. They directly and negatively affect US capital operating overseas, overseas supply chains affecting production in the US, and — assuming some retaliation — access to markets abroad. They raise the price of components and goods that they ship from abroad into the US. They also threaten to raise inflation, risk supply chain disruptions and retaliation, aggravate business uncertainties (especially Trump’s on-again, off-again, maybe-later-again arbitrariness) and make a recession more likely. So no, this is not something business was looking for. 

Is that why Trump hit pause on most of his announced tariffs?

Absolutely. The hubris of Trump and his advisors in bullying friends and allies abroad and expecting quick gains was quickly exposed. US business had been relatively silent but “markets” clearly spoke: stock markets sank, the sale of US Treasuries (government borrowing) faced higher interest rates, and the US dollar fell. A sobered Trump retreated to focus more on China. 

But even here Trump quickly retreated on Apple iPhones imported from China. Trump declared tariffs would be a tax on foreigners and shift costs abroad. But since the extraordinary tariffs on China would have led to an explosion in iPhone prices (or simply resulted in them not being shipped to the US), this caused a mini-rebellion among US consumers. So, Trump retreated, essentially admitting the obvious: tariffs were a tax that would largely be paid by Americans.

Selectively applied tariffs that are part of a larger strategy can have an impact. But tariffs as a shotgun approach, insensitive to the complex realities of capitalism’s global links, and with the delusion of a quick fix, cannot fulfill their promises. 

Trump claims his tariffs are about the US getting a better deal and are needed to address the country’s trade deficit. Is this true?

Far from the US getting the short end of the stick, the US trade deficit reflects unique US privilege as the imperial centre of global capitalism. Any other country with sustained trade deficits would be disciplined by “natural” economic dynamics. It would experience markets losing confidence in its currency, their currency falling in value, and higher import costs (as it would cost more in their currency to buy imports). Imports would consequently fall until they were more or less offset by equivalent exports. 

Not so, however, for the US. The US has run trade deficits every year since 1976 without being disciplined due to the US dollar’s universal status. The value of the US dollar was universally trusted and accepted. Consequently, the US kept getting more of the fruits of labour abroad without having to offer the products of US labour in exchange. This continues so long as the US remains economically strong and can stand behind the dollar, with the US Federal Reserve essentially acting as the world’s central bank, allowing the US to effectively “print” money. 

What of the claim that Trump wants to weaken the dollar to make US manufacturing more competitive?

First, Trump cannot go in two directions at once. His bravado nationalism includes pride in the strength of the dollar, so he would have a tough time going the other way. Second, weakening the dollar is possible, but not easy. If the US acted to lower the dollar, this may lead to other countries following its lead to protect their own competitiveness. Negotiating this with the rest of the world would be extremely difficult — part of the point of the US empire’s long-standing commitment to the rule of law and judgement of markets was to avoid the near impossibility of coping with the complexities and disruptions involved in this

Moreover, the method for carrying this out can prove very problematic. For example, one possible mechanism is for the US to introduce controls that limit the inflow of capital. This might work but comes with other possible consequences: a rise in US inflation as the lower dollar makes imports more expensive, and a shortage of capital (or capital only available at higher interest rates) for consumer and business borrowing. If this becomes more than an exceptional, temporary intervention, it threatens the workings of global financial markets, a key pillar of global capitalism. 

A more practical response might be avoiding alienating US allies and trying to bully China by focusing on China’s trade surplus with the US and negotiating a rise in the Chinese renminbi. But this would not contribute much, if anything, to US jobs. It would instead shift imports from China to countries made more competitive by the rise of the renminbi, and therefore shift the US trade deficit elsewhere. If the US then attacked these countries to correct its trade deficit, we would be back to Trump’s original disastrous attempt to hammer all countries with indefensible and outrageous tariffs. 

What about the claim these tariffs are a response to a more general crisis in capitalism or declining US power. Can these ideas help us better understand Trump’s actions?

I think this misses what is going on. There is a social crisis, not an economic crisis. US capital may not be doing as well as in the ’50s and ’60s, but that was a unique period in its history; it is not a standard by which to judge the present. Since the second decade of the 20th century, the US has gone through two world wars, a Great Depression and what some see as a “long downturn” since the mid-70s (itself half a century). The US has lost jobs, and it has even lost some entire industries, but the question is whether it has been able to adjust — an empirical, not theoretical question. And it certainly has.

If we measure US capital’s success in terms of profit growth, the wealth of corporate owners and, especially, the capacity to dominate the “commanding heights” of the global economy, the US’ record is impressive. It stands at the pinnacle of global high tech sectors (aerospace, pharmacare, biotechnology, health services, computers, software programs, AI) and crucial business services (engineering, legal, accounting, advertising and, of course, finance). And though the US state has not been able to prevent crises at home and within global capitalism — some quite serious — it has been able to contain them. 

The problem is not the weakness of US capital but that its successes have come at the expense of working people. The international economic crisis of the ’70s was turned from possible conflicts among capitalist states to internal wars on their working classes. Capital succeeded in solving that crisis, in good part on the backs of workers. The economic crisis for capital was converted into a social crisis for workers. 

Over time, that has morphed into a legitimacy crisis in part for capitalism, but primarily for capitalism’s political institutions (the state and political parties). It is the failure of the left to address this — the inter-related crises of unions and the socialist left — that allowed Trumpism to emerge. Yet, though the right can mobilise resentments, it has no ability to deliver on its promises to working classes. This defines the challenge for the left. 

So, can we say this crisis of legitimacy explains Trump’s motivations for the tariffs?

I do not know if it completely explains Trump’s motivations — there is a great deal of ignorance and bad economics in Trump’s head — but I do think tariffs reinforce Trump’s frenzied hyper-tariff political agenda. 

This agenda speaks to US nationalism. It diverts attention from the domestic war on workers and how workers’ lives could be far more significantly improved through domestic changes (universal healthcare, substantive access to higher education, affordable de-commodified housing, union rights) than tariffs. It tried to convince US workers that tariffs would replace the need for domestic taxes, and that the promised tax cuts for the rich would therefore not undermine social programs. 

It also reinforces the Cold War on China. But it must be kept in mind that tariffs themselves are not Trump’s main goal; they are only a tool for leverage in changing the larger distribution of costs and benefits within global capitalism to make it “fairer” to the US. 

Whether he can wring some pro-US changes out of his tariff madness and then exit tariffs, declaring that it was those other changes (for example, others paying a larger share of NATO’s costs and buying more equipment from the US, or an upward adjustment to the renminbi) remains to be seen. But along the way other problems  may hit the US and negatively impact the US empire. 

Could this tariff war not just negatively impact the US empire but even lead to China opting to economically decouple from the US?

Yes, but that depends primarily on the US. What is at stake here is not inter-imperial rivalry in the sense of contesting who will lead global capitalism. China does not want to replace the US and take on its responsibilities or burdens. It does not want to decouple, but is determined not to give in to bullying and thereby encourage more US aggressiveness. 

China’s goal is clear: its GDP per capita is only a fifth to a quarter of that of the US, so its primary concern is obtaining some recognition for its constructive role within global capitalism and continuing to develop under the aegis of the US Empire — that is why it often sounds like the main advocate for a “responsible” US Empire. 

The US too does not want to decouple, and risking it is also making its allies nervous. But the US, unsatisfied with its preeminent role in global capitalism and insisting on establishing and consolidating absolute power, risks a greater but unwinnable economic Cold War — or worse.

What possibilities are there that this might create space for Global South countries to pursue more autonomous development strategies?

I do not know. I would not put great weight on the US acting in its self-interest making it acceptable for others to do the same. We should not assume that the modal form of the US empire is over, with its insistence on the sovereignty of states being contingent on the sanctity of private sovereignty, the free flow of capital and the more general rule of markets. A return to “normal” — with or without Trump — is still possible. 

But the new “normal” will reflect the history of what we are living through and it is not clear to me how investors and states will modify the new order. Will China move to a greater dependence on internal markets or shift its exports from the US to Europe and the Global South? How will the Global South respond to a flood of such imports? Will Chinese capital support their development and use its trading surplus to further finance infrastructural developments in the Global South? Will Europe diversify away from a less dependable US and increase its links with China and the Global South? 

Most importantly, we must not treat states in the Global South as if each of them has a national consensus on what they want. Class struggles will affect their paths. Elites will perhaps prefer global economic ties to reinforce their power. Workers and peasants might, on the other hand, fight for a substantive sovereignty — one ready to challenge capitalist priorities and rules — and see their own elites as much, or more, of a problem than the US. 

Given this, how should working-class forces respond to Trump’s tariff war?

A difficult question. I will flag some suggested orientations. First, as noted earlier, domestic issues — what our governments have done or neglected to do for us — have had a much greater impact on working-class lives than the import of cheaper products from abroad. We must not let this be pushed aside by the focus on tariffs.  

Second, it is not all that helpful to simply criticise workers’ support for tariffs. The alternative of no tariffs means free trade, which has augmented capital’s freedoms to allocate its investment and jobs according to its own, undemocratic, priorities. Free trade has been part of weakening and harming the working class.  

Tariffs can potentially play a positive role but — and here is the rub — only if they are part of broader policies to restructure the economy in a socially beneficial way. A short detour to the Ronald Reagan administration’s response to the auto crisis in the mid-80s might help clarify this point. 

Reagan used trade pressures to force Japanese companies to shift from exports to establishing plants in the US. Autoworkers, desperate for some security, cheered the state for “doing something concrete”. But Japanese auto companies did not go where the job losses were. They went to the non-union US south. 

With their brand-new plants, absence of legacy pensions costs, and no pressure to incorporate workers’ rights, they outcompeted the plants in the US north. Jobs did come to the US, but unionised autoworkers were no more secure than before. Soon, these Japanese plants, not the United Auto Workers, were effectively setting standards for the industry. 

Today, auto is no longer the job creator it was. The market for new cars is relatively saturated. That, combined with the steady beat of productivity improvements, spells fewer jobs. As electric vehicles (EVs) — which require less hours of labour per vehicle — replace gas-propelled vehicles, the outlook for jobs is further downgraded. Add to this that the transition to EVs will have to occur, but the US badly lags China despite being so far ahead a few short years ago, and it is hard to see tariffs on their own being much of a solution. 

Third, we must not fetishise manufacturing jobs as inherently “good” jobs. They have historically had the best pay and benefits, but only by way of workers unionising into militant, creative unions. Moreover, the quality of manufacturing jobs has significantly fallen and, in any case, only some 10% of jobs in the US and Canada (less in Australia) are now in the manufacturing sector. Improving the status and quality of service jobs — the jobs many workers in manufacturing will someday have and their kids will most likely have — is the critical challenge. 

Fourth, manufacturing capacity is nevertheless crucial to all countries as part of their restructuring to meet changing needs. This is especially the case regarding the environment. Addressing the environmental crisis demands transforming everything about how we work, travel and live. This implies having the tools and products to transform factories, housing, infrastructures. 

To let facilities close because they do not earn enough profits would in this case be criminal; we need to hang on to these and convert them into producing, by way of national plans, what is socially valuable. This does not mean rejecting trade or some degree of specialisation in particular products. But it does mean both managed or planned economic development and managed, mutually beneficial trade. 

In short, the problems workers face require more than tinkering with the status quo. They call for finally recognising that a socio-economic system based on corporations competing for profits cannot bring workers more secure and fulfilling lives. This is not just a matter of listing better policies but a fundamental question of where power lies and how power itself is transformed. The bottom line is how to build the working-class into a social force with the vision, commitment, confidence and collective organising skills to change the world.