Editor’s Note: This article was first published on Feb. 6. At the time, Trump’s threatened trade war against Canada and Mexico was postponed for 30 days. As of March 4, the tariffs are in effect, along with additional taxes on goods imported from China.
He’s hot, then he’s cold. He’s yes, then he’s no. He’s in, then he’s out. He’s up, then he’s down. Donald Trump appears to be all over the place when it comes to his trade war against Canada and Mexico, as well as in his threats of a future offensive against the European Union and other ostensible allies.
As of this writing, the punishing 25% levies due to be imposed on Canadian and Mexican imports are on hold, at least for 30 days. U.S. importers of Chinese products—already on the tariff list since the first Trump administration—still face increased taxes. Panama, by quitting China’s Belt and Road Initiative, appears to have gotten itself off Trump’s blacklist, for the time being.
As for North America, a few phone calls temporarily postponed the onset of massive price increases, huge layoffs, and tit-for-tat retaliation. Reportedly, the extraction of promises from Prime Minister Justin Trudeau and President Claudia Sheinbaum to spend some funds on border and fentanyl task forces in their respective nations placated the American president.
But to think immigration and illicit drugs are the real reasons for the Trump trade wars would be to totally miss the big picture. What we are actually witnessing in this moment is the playing out of a struggle within the ruling class over what the future of U.S. capitalism—in fact, world capitalism—should look like.
Capitalism’s dichotomy: Free trade vs. protectionism
Karl Marx and Friedrich Engels wrote in The Communist Manifesto all the way back in 1848 that the “need for a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe.”
In Capital, Marx described the phenomenon as an outgrowth of monopoly in the domestic market: “Hand in hand with the concentration of capital, …the process to entangle all nations in the network of the world market, and consequently, the international character of the capitalist regime develops.”
Their analysis showed that the pursuit of both the resources needed for commodity production and outlets for the sale of those commodities compelled capitalism to constantly expand outward beyond the bounds of national markets.
The two were writing at a time when the struggle among capitalists over the question of free trade vs. protectionism dominated economic debates, a period when British capitalism was the dominant force in the world but capital was split on the best trade policy to pursue toward the colonies and rival economic powers.
Some capitalists relied on the home market for the production and marketing of their goods; they wanted protective tariffs to shield them from competition. Another section—particularly big manufacturing capital—had grown so large that it needed overseas suppliers, customers, and even labor to efficiently and profitably carry out operations.
Workers were being pushed to pick a side. Marx and Engels, as leaders of the international labor movement, refused to be drawn into the dichotomy of the competing factions of the ruling class.
“We have no intention of defending protective tariffs any more than free trade, but rather of criticizing both systems,” Engels wrote at the time. The two pointed out the hypocrisy involved in this “debate,” saying that capitalists had no principles and blew with the wind depending on what was profitable for them at any given time.
All capitalists desired the shelter of protectionism when their industries were in their infancy—or when they came under the threat of increased competition. In The German Ideology, the founders of scientific socialism wrote:
“Manufacture [meaning industrial capital] was all the time sheltered by protective duties in the home market, by monopolies in the colonial market, and abroad as much as possible by differential duties. Manufacture could not be carried on without protection, since, if the slightest change takes place in other countries, it can lose its market and be ruined.”
While they supported the protectionist efforts of colonies and developing countries to build up their industries in the face of the battering economic assaults of imperial powers, and though they sympathized with and backed workers fighting displacement due to trade, Marx and Engels were always skeptical of the rationales given by the major capitalist states when they imposed tariffs. Engels called big power protectionism “the worst of all.”
He emphasized that “those who advocate the protective system never fail to push the well-being of the working class” as a supposed benefit of their preferred policy. But intelligent workers, he said, “know very well this is a vain delusion…. Whether protective tariffs or free trade or a mixture of both, the worker will receive no bigger wage for his labor than will just suffice for his scantiest maintenance.”
Marx and Engels knew that, generally, no matter which policy prevailed in the leading capitalist economies, it would be used to the advantage of capital and the detriment of labor everywhere.
They also knew that tariffs were a self-escalating ladder of conflict between the capitalists of competing nations. As Engels said:
“Protection is at best an endless screw, and you never know when you have done with it. By protecting one industry, you directly or indirectly hurt all others, and have therefore to protect them too. By so doing, you again damage the industry that you first protected, and have to compensate it; but this compensation reacts, as before, on all other trades, and entitles them to redress, and so on ad infinitum.”
And in the case of extreme disputes over trade, later Marxists warned, economic warfare could be superseded by actual warfare. V.I. Lenin said protectionism on the part of big powers was reactionary in nature. It “retards the country’s economic development and serves not the interests of the entire bourgeois class”—let alone the entire society—“but merely a handful of all-powerful magnates.”
The First World War, during which Lenin wrote his classic book Imperialism: The Highest Stage of Capitalism, was an “annexationist, predatory war of plunder… a war for the division of the world, for the partition and repartition of colonies and spheres of influence of finance capital.”
That war put a damper on the period of free trade and globalization that had preceded it and heralded a return to protectionist tariffs. The national economies of the victorious major imperial powers were reoriented toward an intensification of core-periphery ties with their colonial hinterlands and away from inter-imperial trade.
In the case of the U.S., this was characterized too by a revival of Manifest Destiny thinking, an obsession with dominating all of the Americas, and a withdrawal from European trade and security entanglements. Defeated Germany’s denial of colonies and thus its demotion in the ranks of the world imperial powers would become a major factor in German capitalists’ turn toward fascism and expansionism. The Great Depression only intensified such trends.
Enforcer of free trade
World War II and its aftermath, however, flipped the script yet again. With all its capitalist competitors destroyed or hobbled by the destruction of the war, U.S. capitalism emerged as the world’s preeminent economic and military power.
It was in this context that U.S. capitalism—then dominated by heavy and consumer goods manufacturing—reignited globalization and pushed the capitalist half of the world toward freer trade and lower tariffs. The need for international markets and resource suppliers for U.S. commodity production was the driving concern of the day.
For the better part of the next 80 years, U.S. capitalism played the role of enforcer of global free trade, a system that came to encompass even the former Soviet bloc and socialist China. This global economic order was codified in thousands of treaties and trade agreements and via the creation of the World Bank, the International Monetary Fund, the European Union, NAFTA, the founding of the World Trade Organization, and the like.
The mantra of free trade has always been that it promotes competition, and through that competition, the productive forces advance. The nations, companies, and workers who prove themselves insufficient are shaken out.
Adam Smith’s “invisible hand” is thus said to benefit everyone because the most efficient forms of production will always win out. Once the capitalist system as a whole descends into crisis, however, such principles often go out the window—at least for the capitalists who are losing out in the competition.
In such moments, protectionism rushes to the fore, offering an alternative. The trade wars being launched by Trump and the MAGA faction are an example. The current crisis that Trump’s tariff wars hope to solve has its roots in the failure of neoliberal globalization, which is itself the now outdated solution to a previous capitalist crisis.
The crisis cycle
In the 1970s, it was obvious that the rate of profit in the advanced capitalist economies was dropping, the result of over-investment in automation, a militant labor fightback that pushed wages higher, and assertions of economic sovereignty in the newly-independent nations of the developing world.
Part of the remedy the capitalist class pursued then was a process that became known as financialization. Over time, more and more capital investment was gradually moved out of the “real” economy—those industries where people actually make and sell material goods and services—to the financial sector of the economy, or what is sometimes referred to as the “paper” economy.
Activities in sectors such as banking, insurance, and investment started to vastly expand, and all of these industries depended on leveraging domestic as well as international financial markets.
Occurring simultaneously with this structural shift in the economy was an ideological attack by the ultra-right. Free market fundamentalists like Milton Friedman declared that government had no place in the economy. Privatization of public companies and services was urged. The removal of government oversight of banks and corporations was said to be the best way to restore profitability and economic growth. Bust up the unions, which are hindrances to the allocation of resources. And any residual tariffs and protectionist measures of the earlier era were targeted for elimination.
It all seemed to work…for a time. Profit rates did increase once more (handsomely for finance, poorly for industry), and consumerism was back. But much of the celebration rang hollow for millions of poor and working people. Expenditures on social welfare declined further, and the number of good-paying, full-time union jobs continued to erode—often due to outsourcing and deindustrialization as corporations sought lower production costs elsewhere in the world. The working class increasingly came to rely on debt to maintain living standards, with more people running up their credit cards and taking out second and third mortgages on their homes.
At a superficial level, though, things looked good. GDP was indeed growing, and everyone was talking about the “new economy” of service and high-tech jobs. These “good” times were only sustained, though, by repeatedly delaying the downturns that are a basic part of the capitalist economic cycle—downturns which became all the more dangerous as economic investment drifted further and further away from actual goods and services.
Wall Street invented all kinds of new ways to funnel money through international financial channels in order to generate huge payouts during this time. There were various kinds of derivatives, credit default swaps, collateralized debt obligations (CDOs), and a myriad other forms of ever-more complicated financial instruments.
Much of this activity was simply the cutting up and endless buying and re-selling of what in essence were just complex IOUs. Little that was real was being produced in this sector, yet billions of dollars were being made by the capitalists who dominated it. Finance, which had in the past accounted for a small percentage of U.S. economic activity, accounted for nearly a quarter of the country’s entire economy by the first decade of the twenty-first century.
Financial speculation and outright gambling inflated one investment bubble after another. In the U.S., the federal government used its fiscal and monetary policies to encourage such activity in order to avoid recession. In the late 1990s, there was the dot.com bubble, which saw massive amounts of capital flood into the internet and high technology industries. As that hype died down, money began pouring back into other stocks. Later, it was housing and subprime mortgages—and that’s when the bottom eventually fell out.
It took several months to fully develop, but by the fall of 2008 the effects were clear. Banks and firms that had invested heavily in the subprime mortgage mess were in big trouble. Lehman Brothers, one of the world’s biggest banks, went under as the invisible hand did its job. Other banks around the globe panicked; they refused to make loans to one another, to businesses, or to consumers out of fear they would never be paid back.
Credit markets rapidly froze as lenders held tight to their cash. The world’s biggest insurance company, AIG, teetered on the brink, and mortgage giants Fannie Mae and Freddie Mac looked ready to collapse.
Free market mythology and the pursuit of unregulated financial globalization had brought capitalism to the edge of an abyss. It became obvious to almost everyone that if the government did not act, the economy could crash. And so, the bailouts began. Billions of dollars of taxpayer money poured into the banks to “recapitalize” them. Many of them, along with private companies like General Motors, were effectively nationalized. In some countries, they actually were. State intervention in the economy was seen by all, even Republican George W. Bush, as unavoidable.
In the wake of the 2007-08 crisis, many progressives eagerly announced the death of neoliberal ideology and the structural arrangement that it had put in place. Many thought the big bailouts, the partial nationalizations, the heavy deficit spending, the Affordable Care Act’s encroachment on the private insurance market, and other moves all signaled the “return of the state” and the revival of postwar Keynesianism.
However, rather than an abandonment of market fundamentalism, what the ruling class’s attempts to fight the global financial crisis showed was that neoliberalism was always about cementing capitalist class power, and that aspect of the system wasn’t going anywhere.
There was no deep restructuring on the scale of the 1980s, when auto, steel, and other plants went bankrupt or were offshored. U.S. capitalism did not clear out much dead capital apart from a few banks; instead, it pumped life-sustaining blood into the system via zero interest rates and Treasury debt purchases. Much of the cost of the crisis was offloaded onto the working class via lost retirement savings, mortgage foreclosures, layoffs, slashed wages, and the funneling of public tax dollars toward subsidies for private capital.
Capitalism dodged a bullet, but the interventions of the state failed to initiate a new boom. Instead, neoliberalism hobbled along like a zombie. It is too early to say, but today’s flood of cash into AI, super-powered chips, and similar sectors may prove to be yet another bubble.
Divided capitalist class
Although Trump’s tariff offensive and annexation threats are intended to project a powerful and confident U.S. capitalism, the reality is they are an attempt by one section of the ruling class to escape this prolonged crisis, a crisis which they blame on another section of the class—the “economic nationalists” versus the “globalists,” in popular media parlance.
On the back foot in this battle right now are the market fundamentalists, the figures of the establishment consensus who still hope to prop up neoliberalism’s model of globalization, international free trade, and U.S.-led military alliances—a system that has been in a terminal state since the onset of the global financial crisis and the Great Recession of 2007-09.
From Bush to Obama to Biden, politicians on both sides of the partisan divide have for almost two decades devoted themselves to trying to save the system from its own contradictions. While they achieved periods of stability via neo-Keynesian interventions in the economy and selective assertions of U.S. imperial power abroad, essentially, all they managed to do was kick the can down the road. The long-term profitability crisis of U.S. capitalism has still not been resolved.
Arrayed against the globalization crowd—and currently with their hands on the levers of power—are Trump and the forces of the MAGA faction. They’re betting that the way out of capitalism’s long slump is a reconsolidated form of the imperial bloc strategy and the revival of “spheres of influence.”
In his factional war to reshape the Republican Party from 2015 through to the 2024 presidential campaign, Trump courted the so-called “losers” of globalization: domestically-oriented small and medium capital in sectors like services, light manufacturing, and regional energy exploration.
As capital became increasingly differentiated in the 1990s and 2000s between these sectors and the more advanced globally-oriented ones like finance, high tech, and big oil, Trump and his far-right nationalist ideologues crafted an economic agenda premised on protectionism and “Making America Great Again.”
To this section of the bourgeoisie, who believed their profitability and ability to compete depended on a more closed economy, Trump joined his own mass movement of (mostly white) working class and middle-income Americans, many of whom also saw little benefit from globalization.
They weren’t alone, though: The same story of insecurity and stagnation was shared by pretty much the entire working class for the last 40+ years.
In constant dollars, wages barely rose for four-and-a-half decades, even as U.S. GDP more than tripled. Professional and small business incomes were under a constant squeeze, while the amount of wealth and tax breaks going to the top soared via “trickle-down economics.” Public benefits have had a precarious existence, constantly subject to being placed on the chopping block. Medical, dental, childcare, and educational costs skyrocketed, and working people sensed the threat of technological displacement and depressed labor markets.
Between the two ruling class political parties, there was near total consensus on pursuit of this variety of capitalism. The so-called traditional party of the working class, the Democrats, offered tinkering around the edges but no real alternative to the neoliberal model. Some, like Bill Clinton, celebrated and eagerly promoted it. Only Bernie Sanders, sections of organized labor, the movements of the socialist left, and efforts like the Poor People’s Campaign proffered a different future, but they have yet to gain a sufficient political foothold to impose a different agenda.
The COVID-19 pandemic opened a window of generous unemployment payments, student loan pauses, and benefits such as child tax credits and the like, especially during the Biden presidency, but it all proved momentary. There was again chatter about the revival of “socialism” in the media as working-class militancy and revolts like Black Lives Matter exploded on the scene, but sharp interest rate hikes and militarized police responses showed that class fightback and dissent would still be tightly controlled.
Partitioning the world, again
If it were true that much of globally-oriented capital was skeptical of or neutral toward Trump in 2016, by 2024 they changed their tune.
Sectors long known for backing unrestricted free trade, open financial markets, and globalized supply chains—like the big banks, advanced technology firms, and transnational manufacturers—have in recent elections backed both Democrats and free market Republicans, investing their campaign dollars with whoever looked like they’d provide the best policy payoff.
In last year’s election, several capitalist titans still threw in their lot with Kamala Harris and the Dems, including: OpenAI’s Sam Altman, financier Marc Cuban, Bank of America’s Chad Gifford, Time Warner’s Jeff Bewkes, Ken Frazier of the Merck pharma corporation, and Bruce Heyman, a former director at Goldman Sachs.
But more notable was the rush of tech bro billionaires to Trump’s side—figures like Elon Musk of X/Tesla, Meta’s Mark Zuckerberg, Amazon’s Jeff Bezos, and Google/Alphabet’s Sundar Pichai. Trump’s cabinet, meanwhile, presents a similar picture, populated by billionaires from the shadowy crypto world and outfits like the Soros Fund, Cantor Fitzgerald, JPMorgan Chase, and Paypal.
Why did these supposedly globally-oriented capitalists switch to backing the most protectionist presidential candidate in a century? For some, it’s about consolidating their influence over whoever happens to be in office at the moment, but for others, it’s also a reaction to a changing world economy.
They not only crave tax cuts and deregulation; they also possess a deadly fear of competition. Like the capitalist class of the early 20th century, when faced with danger, a growing share of today’s bourgeoisie is prepared to dump global free trade in favor of a more sealed market—an imperial bloc or sphere of influence, if you will—where competition is trimmed and monopoly is assured.
Partitioning the world as Lenin described in the days of classical imperialism, they believe, is the only way to truly ensure the dominance of U.S. monopoly, which they recognize is slipping away as China and lesser rivals like Russia and the BRICS nations rise.
To restore profits and reassert control, tariffs, trade wars, and threats of outright conquest are the preferred weapons of this section of the ruling class. The rollout of their strategy in a blitzkrieg fashion is what the world is watching now.
And so, against this broader background, the seemingly senseless starts to make sense. Mainstream media commentators and liberal hacks ponder why Trump would start trade wars with the U.S.’ top allies and trading partners, like Canada, Mexico, and other countries in Latin America.
But when you believe that consolidating and securing your regional bloc is the path to control and limit competition, then forced integration and intimidation of supposed friends with whom you already have close trade ties is a logical course of action. The same goes for the approach toward Denmark when it comes to resource-rich Greenland. Whether or to what extent all these tactics will work is an open question.
Under threat, Panama caved and announced it would leave China’s Belt and Road economic partnership. That—and not worries over the Panama Canal—was what really motivated Trump’s threats toward that nation. Colombia negotiated the terms under which deportees would be sent to its airports, but the deportees are arriving just the same. El Salvador’s president, meanwhile, became an accomplice on the deportation and prison front.
In Canada and Mexico, by contrast, politicians across the political spectrum and the media managed to corral public support for retaliatory measures and successfully pushed to delay the onset of tariffs. But they too will seek to further accommodate Trump, and governments and corporations alike in those countries will use the situation to squeeze workers on their side of the border, citing the trade war as an excuse to increase exploitation, freeze budgets, and cut services.
Splitting the working class
Caught in the middle, under pressure to choose a side and guaranteed to get the raw end of any deal, is the working class—in the U.S., Canada, Mexico, Europe, and elsewhere. Will they support “their” capitalists and join in the jingoistic sloganeering of the trade wars, or will they find a way to forge cross-border connections and build a transnational resistance movement?
That is the question of the hour, and how workers respond could play a major role in shaping the outcome of the current struggle within the ruling class. Marx warned that if the protectionists among the capitalist class ever spoke honestly and openly to workers, they’d say: “It is better to be exploited by one’s fellow-countrymen than by foreigners.”
It’s important to combat such thinking within the ranks of the U.S. working class, difficult as it may be. Workers in the U.S., understandably, have been feeling a sense of abandonment from both of the established political parties for years, and many are willing to try something that looks and claims to be new.
Part of the class has gone over to Trump; they make up the mass MAGA base. While they hold many grievances both legitimate and not, abstract debates about trade and tariffs alone haven’t been sufficient to lock in their support. They’ve been cajoled around other things—like race, religion, abortion, immigration, sexuality, gender, loss of jobs, and more. They’ve been cemented into a solid camp of loyalists who have so far supported any plank Trump has put in the platform.
Another section of the working class—most of organized labor, African Americans, and substantial parts of the immigrant and LGBTQ communities—have refused to be divided and instead form the core of the resistance movement opposing Trump’s drive toward fascist politics. A third and quite large section of the working class remains politically disengaged.
The latter two groups are the primary foundation for growing an anti-Trump and anti-fascist majority movement, but eventually, even parts of the MAGA base will be needed if we’re really going to change the tide.
The anti-MAGA movement will also have to be on the lookout for further splits in the ruling class. Trump’s application of tariffs is haphazard and unpredictable—two things that make Wall Street nervous. Instability makes it very difficult for those with money to know where to invest it, so we can expect that the administration will come under increased pressure from finance capital to rein in the chaos.
Historical experience has shown that protectionist policies like those being pursued by Trump do not protect or help workers in the long run, just as Marx and Engels warned over 175 years ago. Capitalists are only concerned with maximizing their profits, and they will pursue that goal at the expense of not just foreign capitalists but workers everywhere.
That’s why workers have to build their own international connections and look for ways to coordinate their responses to these capitalist offensives. They must remember Marx’s observation:
“So long as you let the relation of wage labor to capital exist, it does not matter how favorable the conditions under which the exchange of commodities takes place, there will always be a class which will exploit and a class which will be exploited.”
As with all news-analytical articles published by People’s World, the views represented here are those of the author.
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