Trump Capitulates

Trump has capitulated on his trade war, again, and now in the most humiliating manner. It is the same kind of capitulation as that of the Brexiters in Britain, which occurred as a series of such collapses, which they sought to deny, but which everyone could see.

Trump, of course, was one of the prime backers of Brexit, along with his friend Putin. Theresa May claimed that “Brexit Meant Brexit”, before having to accept that her threats that Britain would commit suicide, via a “No Deal”, if the EU didn't give it what it wanted, were empty. She couldn't even get a majority in parliament for her Brexit proposals, and when she sought to get more Tory MP's to do that, by calling an election in 2017, the result was that she lost a load more seats, and her majority, with Corbyn's Labour Party securing the biggest increase in the Labour vote, and number of seats since 1945. As the Brexiters tried to claim that it was all down to May not really believing in Brexit, she was replaced by the arch-Brexiter Boris Johnson, who also couldn't get a majority for his Brexit plan, and who ended up also, capitulating to the EU, having to recognise that if Britain wanted to continue to export goods to the EU, which is its largest trading partner, it would have to comply with EU standards, laws and regulations. In fact, on that basis, Johnson had to accept a worse deal in relation to Northern Ireland, than that negotiated by May, which he had rejected.

As, the reality of Brexit began to role out a growing chaos, it was temporarily masked by the pandemic, or more precisely by the lockdowns that the government, and other governments introduced which shut down a large part of economic activity. The lockdowns were, as Professor Woolhouse has set out, stupid an act of madness, driven by the lie that the COVID virus was an equal threat to everyone, whereas the reality was that it was only a serious threat to around 20% of the population, i.e. mostly those over the age of 70. The data on COVID deaths, shows that, indeed, 90% of them are of people over 65. The ridiculous laws and regulations that Johnson introduced, under pressure from a sensationalist media, became his own downfall, as politics descended to the level of pantomime, in the subsequent furore over who had attended a party during that time, and what constituted a party or just a work meeting!!!

But, the reality was, also, that Johnson had also not been able to “Get Brexit Done”, as he claimed, because Britain continued to have to comply with EU laws and regulations – the thing that Trump also now complains about, when he talks about the EU refusing to accept US GM foods, chlorinated chicken, and so on – and was being attacked by Farage, and so on, which led to the split in the pro-Brexit vote in 2024, between the three petty-bourgeois nationalist parties – Reform, Tories and Blue Labour – which allowed the latter to win, despite seeing the worst drop in its vote ever, down 30% from Corbyn's vote in 2017, and the lowest share of the vote, for any winning party ever. But, of course, before that, the Farage narrative, which insisted that Johnson had betrayed Brexit, was itself exposed as a lie.

They lined up behind Truss, who proceeded to pursue the course of a true Brexit, and all of the petty-bourgeois, nationalist agenda that goes with it. Within days, the financial markets had punished the Pound, and UK bonds, pushing the government's borrowing costs ever higher. Not surprisingly, Truss was quickly removed.

Trump, who had told Theresa May that she should “sue the EU” - on exactly what grounds, remains a mystery, as it was to May when he suggested it, and was probably a mystery to Trump as well – over Brexit, attempted to pursue a similar petty-bourgeois, nationalist agenda in the US, in his first term, but had little more success, as the ruling-class, and its state frustrated his efforts in the same way as had happened in the UK with Brexit. Trump's trade war, which was ramped up more after 2018, when global growth had been rising causing, interest rates across the globe to rise, which, in turn saw a 20% drop in US share prices, had the effect of slowing that growth, and giving justification for the US Federal Reserve, and other central banks to stop their removal of QE, which enabled money to flow back into financial speculation. The imposition of lockdowns saw that policy of QE, and destruction of the value of currencies intensify further, which led to the global spike in inflation that began in 2021, and has continued since, in a series of waves.

As I wrote at the time, although Trump's trade war – and to a much lesser extent Brexit – caused a slow down in global trade and growth, it was only temporary, because the consequence was, already, to lead to that trade to simply flow into alternative channels, and for growth to then resume. Again, lockdowns disguised that, but, once lockdowns ended, the explosion of trade through these new channels, also reflected in what has been termed, a break down of existing supply chains, saw global growth rocket, and all of those devalued currencies, now led to the inflation that followed. There is, of course,an element of truth, in Trump's argument, here, because that re-routing of trade, also meant that China, shifted some of its production to Vietnam and elsewhere, much as Britain and the US, shifted their production of mature products, requiring only cheap unskilled labour, to developing economies in the 1980's.

In fact, the consequence of Trump's trade war, at that time, was to create conditions in which China, and others in Asia, began to develop alternatives to the US, and its dominance of the world trading systems and mechanisms. It has put China in a stronger position, now that Trump has resumed what he left off in 2020. It also, created the conditions, after 2020, in which the sanctions applied by US imperialism, and its subordinates in Europe, and elsewhere, to Russia, were not only ineffective, but largely counterproductive. They failed to tank the Russian economy, which in fact, has continued to grow faster than economies in the EU, on the back of its exports of energy and primary products to China, India and elsewhere, whilst the rising costs of those things to the EU, primarily Germany, as a result of the US inspired boycotts, has tanked the German, and, thereby, the EU economy, and reduced its rate of profit. The beneficiary was China, as its position in dominating a Eurasian economic bloc was strengthened.

When Trump lost the 2020 Presidential election to Biden, the underlying interests of US imperialism did not change, but could now find a more open expression than the deformed expression that resulted from Trump's petty-bourgeois, nationalist agenda, much as had happened, in Britain, as a result of Brexit. Biden continued, in large part, with Trump's trade war against China, but sought to restore the position of US imperialism in the Pacific that Trump had undermined. Australia, which had been drawing closer to China, on which it depends, as a market for its primary products, was drawn back towards US imperialism, via AUKUS. But, ultimately, the gravitational pull of China, was bound to reassert itself, and that has been accelerated, as Trump imposed his tariffs on Australia, too, driving it back into the arms of China.

The Australian Prime Minister, not surprisingly, claims that he will not rush into the arms of China, but the laws of capital and of history are not listening. Those same laws, as I set out at the start of the year, inevitably drive, not only those economies in the Pacific towards China, but, also, drive Europe in that direction, as well as Central Asia. Trade and economic ties always develop first, and most with those in your own geographical location. That is why nation states developed, and it is why the EU, makes sense as a politico-economic bloc, whereas the British Commonwealth, comprising nations spread across the globe, does not. The reality is that the US is a long way from Europe, across 3,000 miles of Atlantic Ocean, as well as a long way from many of the Pacific economies. With the developments in transport, in terms of the shipping of freight, and with the developments in telecommunications and the Internet, in relation to many services, that may have become less important than it was a century ago, but it is still significant, when looking at the trade and economic relations on the single land mass of Europe and Asia.

In practice, the US is just a big version of Britain, and of Brexit. Whatever, the ideologically driven delusions of the petty-bourgeois nationalists that back Brexit, or that back Trump, the reality is that the world is now a global economy, dependent upon global supply chains. That global economy is divided, not into the nation states of the 18th./19th century, but into large multinational, politico-economic blocs, each setting their own rules, regulations and laws – partly driven by the political dynamics in those blocs, and partly, also to protect and advance the interests of the capital based in those blocs. It is these blocs, which then, negotiate with each other, on that same basis, to regulate the trade between them, and in the post-war period, it was the development of global, para state bodies such as GATT/WTO, IMF, and World Bank that were the institutions through which these regulations, typical of social-democracy/imperialism, were formulated. Brexit was an attempt to reverse that, and failed, causing considerable damage to Britain in the process, and Trump's agenda is equally doomed, despite the fact of the huge size of the US economy.

The rationale of the economic nationalism of Brexit, and of Trump is autarky, and it seems that that is what Trump was really being driven to, having listened to the ravings of Peter Navarro, who even Elon Musk has correctly described as “dumber than a sack of bricks.” Navarro developed a set of ideas that influenced Trump, which rather like the ideas of the Brexiters, basically claimed that there is an advantage in such autarky, and from the imposition of high tariff walls, and other measures of protection. Asked where the evidence for this came from, Navarro referred to a paper from one Ron Vara, in fact, as is fairly easily discerned, Ron Vara is just an anagram of Navarro!

As I have set out, previously, there is history and logic on the side of Canada, Greenland and Mexico being a part of the United States. Marxists, in those countries would argue for them to voluntarily become a part of a North American state, just as we argue for a European state, and so on. Such developments are historically inevitable, and progressive. That, of course, as Lenin and Trotsky pointed out, does not mean that we advocate or support the imperialist manifestation of that progressive, historical trend, in imperialist wars, and forcible annexations, such as Putin's war against Ukraine, or Trump's threats against Canada and Greenland, or Netanyahu's genocide in Palestine.

Trump's trade war waged against Canada and Mexico, along with his trade war against the rest of the world was stupid, even from that perspective. US imperialism's main imperialist competitors are China and the EU. China is the dynamic, rising imperialist power, with a population, and so internal market of more than 1 billion people, but the EU, whilst it has a population of less than half that, is comprised of established and developed, advanced economies. In terms of value, the EU is the world's largest single market. But, US imperialism has recognised China as its main imperialist threat, despite the fact that large amounts of US capital has been invested in China, and China provides a large part of the manufactured goods that the US economy now consumes, and which could not be efficiently produced in the US, despite Trump/Navarro's claims, as well as China, like Japan before it, lending huge amounts of money to the US, in the purchase of US debt, to enable it to continue to consume on that scale.

As financial markets have crashed, within the last week, not only stock markets crashing, but also being joined by bond markets, and the prospect of Trump facing his own Truss moment, yesterday, and the prospect of an actual failure of a US bond auction, he capitulated, and announced a 90 day pause in his “reciprocal” tariffs, other than on China. Like Boris and Brexit, Trump tried to hide the fact of the capitulation, by claiming he'd got what he wanted from dozens of countries begging him to do a deal, with only China refusing to do so. It was nonsense of the most moronic kind, and delivered with Trump's own brand of childish language. Rather than dozens of countries pleading with him to do a deal, and “kissing his ass”, the opposite was true.

Canada had just imposed its own retaliatory tariffs on the US, so had the EU. Vietnam and others had agreed to trade talks, just as had Brexit Britain, reduced to that kind of third order of economic power, but, even in these cases, the agreement to talks on trade does not in any way signify a willingness to simply accept Trump's terms. Far from it. In fact, the consequence of Trump having isolated the US, and set itself against not just China, but also, the EU, Japan, Australia, Africa, Asia, Latin America, and even its closest and biggest trading partners in Canada and Mexico, and even penguins on isolated islands, was to unite all of these other economies against it! Canada was looking to replace its relations with the US by a closer relation to the EU, for example. The big winner, in fact, was China, as its position in Eurasia, and most immediately in the Pacific, has been greatly enhanced.

Trump's capitulation, much as with the capitulation of Truss, in 2022, was to immediately cause the crashing stock markets to do a sharp about turn, rising by as much as 13%, although still not returning them to anywhere near the levels they were at, prior to the carnage created by Trump's tariffs. And, notably, even as stock markets rose, bond markets continued to sell-off, as the prospect of economic slow down, and demand for capital, was reduced. In addition, given the dependence of the US bond market, on money flowing in from China, and Japan, the recent events highlight the potential for money to increasingly move out of an unstable US economy, under the Trump regime, causing US assets to sell off, and interest rates to rise. If China sells off some of its US bonds, perhaps to finance a fiscal expansion in China, and development of its own domestic market, that would cause US bond yields to rise, and would probably prompt the Federal Reserve, under pressure from Trump, to engage in a new round of QE, which would devalue the $, and bring with it a new wave of inflation, as happened after 2020.

Of course, again as with Brexit, that rise in inflation and cost of living for US consumers, the diminution of the power of the US in the world, the fall in US profits that will arise from its higher costs of production, and rise in US wages to compensate for the higher cost of reproducing US labour-power, and yet still failing to return the US to the days prior to the 1980's, let alone a golden age of free market capitalism, is far from what Trump promised the huge number of petty-bourgeois reactionaries, and demoralised sections of the population that voted for him. That indicates the degree of bankruptcy, not just of Trump and that ideology of petty-bourgeois nationalism, but of the social-democracy of the preceding 80 years, since WWII, and particularly, over the preceding 40 years, since the 1980's, that created the conditions in which Trump and Brexit became possible.