Lindsey German looks at the new protectionism

The Trump presidential onslaughts show no sign of abating. This week he announced 25% tariffs on goods from the US neighbours Mexico and Canada, plus 10% tariffs on China. The story he has told US workers is that this will bring jobs ‘home’ and improve their living standards. But the trouble with tariffs is that the jobs won’t come ‘home’ because capitalists will simply shift production from for example, China, to say, Vietnam.  And the increased price rises which result will fall predominantly on workers, rather than on the billionaires who applauded at Trump’s inauguration. 

This move by Trump just underlines how much the world is moving away from the globalised trade which defined the neoliberal era of the past four decades. The free market has failed, leaving more and more people in poverty, seeing growing inequality between the vast majority and the super-rich, and creating political crisis in the richest and most powerful western countries.

This is expressed in the form of political conflict and failure – look at the crises of government in France and Germany, the two major powers in the EU– but it is also expressed economically, as governments struggle to deal with the challenges now facing them. One feature of this is a growth in protectionism, as countries seek to limit or prevent competition from rivals. Another is the closing of borders to migrants in response to far-right political demands, in turn playing on discontents over public services and the cost of living from working class people.

Trump’s threats are not new. But as one commentator described them: ” This could be a trade war on steroids,” said Ryan Sweet, chief US economist at Oxford Economics. “The first round was more targeted. Now they seem to be going across the board — and faster than I expected,” he added.

The tariffs are allegedly in response to illegal drugs trade and migration through the US’s northern and southern borders. But to respond to these with economic sanctions ignores the fact that such sanctions will have an effect on the US itself – and those sanctioned are likely to retaliate.

So the outgoing Canadian prime minister, Justin Trudeau, in a televised address talked about tariffs on US imports to Canada, including manufactured goods, fruit juice and alcohol. It is not clear to which goods Trump’s tariffs will apply, but if they include the oil imported from both Canada and Mexico then this will mean higher petrol prices in the US. Canada exports raw materials to the US, Mexico large quantities of fresh fruit and vegetables, as well as oil.

Whatever the outcome, they will mean higher prices for working class people in these countries, much greater economic clashes, and a volatile political relationship – and this is in countries with whom Trump signed a trade agreement in his first term.  It is a form of class war on workers who will be the ones to suffer. It can also lead, as some fear, to a world crisis of supply similar to that during Covid and to recession in Canada and Mexico.

The growing competition between the US and its closest rival, China, is also reaching crisis point. The huge US stock market drop in technology shares last week following the launch of China’s DeepSeek AI start up rival to the major western firms caused shock waves:

Technology stocks tumbled on Monday after Chinese artificial intelligence start-up DeepSeek stunned Silicon Valley with advances apparently achieved with far less computing power than US rivals. Shares in California-based Nvidia, one of the biggest beneficiaries of spending on AI chips, plunged almost 17 per cent, wiping out almost $600bn of market value, a record loss for any company.

Add to this the market advantage China has in the production of cheap electric vehicles, and it’s clear that the Trump tariffs are a response to competition with which the US finds it hard to deal.

Trump’s trade wars are a crude form of protectionism in the face of this competition but as the leading military imperialist power he has the weapons at his disposal to back up any threats. And protectionism – as we saw in the 1920s and1930s – can turn from economic to military competition, with devastating consequences of recession and war. Trump has already made clear that protecting the military and strategic interests of the US comes before any regard for international agreements.

Hence Greenland and the Panama Canal are in his sights to ‘protect’ the US from supposed threats from Russia or China. He gambles (correctly) on the craven attitudes of his supposed allies such as the EU states and Nato members who are hoping that his current interest in Greenland (now controlled by EU country Denmark, although its inhabitants want independence) will only be temporary. While the EU and Nato states expressed outrage at Russia’s invasion of Ukraine in 2022, they are silent on Trump’s outrageous attacks on other countries. They are also silent on his support for Netanyahu, his plan to ethnically cleanse the West Bank and Gaza, and his support for genocide.

Those who believed that Trump might have ushered in a less belligerent and aggressive period than his predecessor are now being disabused. Trump represents a wing of US capital desperately trying to hold its own and ‘make America great again’ in the face of economic and military rivalry, and its own declining imperial power. It’s not a pretty sight.

This week: I will be spending a lot of time working on the protest outside the court case for Chris Nineham, unjustly arrested on our protest on 18 January, and organising for the next mass Palestine protest which will be to the US embassy on 15 February. This is the 22nd anniversary of the 2 million strong march over the Iraq war, and the first opportunity to show Trump as president exactly what we think of his policy on Palestine. I’m also looking forward to reading the new book by Pankaj Mishra The World After Gaza published this week.