Trump speaking to workers in Crosby, Texas in 2019. Credit: Pixabay/public domain
President-elect Donald Trump has declared his intention to enact tariffs on trade from, at least, China, Mexico and Canada. He’s also threatening tariffs on BRICS nations if they are not sufficiently supportive of the dollar. Trump has also floated an across-the-board tariff on all goods coming into the country, and specific tariffs on individual companies like John Deere. These tariffs are supposed to improve the situation for the American worker and the country writ large. Given the ravages of deindustrialization in large swaths of the United States, moving away from “free trade” holds an instinctive appeal to those of us fighting to make ends meet.
In reality “protectionism,” as these sorts of tariff policies are called, is just another of the ruling elite’s economic strategies. That, like, “free trade,” comes with a range of problems for workers, to greater or lesser degrees depending on one’s occupation. With Trump linking tariffs to issues like migration, dollar supremacy and managing the fall-out of tax cuts for the wealthy, the general effects of tariffs will also be affected by political shocks.
The very debate over “trade policy” reflects how inadequate the capitalist system is for meeting the needs of the vast majority of working and poor people. The problems it looks to solve can only be addressed by replacing the profit-first orientation of capitalism with the people-first orientation of socialism.
Tariffs 101
A tariff is a tax — a tax on goods coming into a country from another jurisdiction. The popular perception is that this is a tax on foreign companies in other countries. However, the reality is different. A tariff is a tax on imports, so most of the burden falls on the companies importing either fully produced goods or parts to assemble or sell in the U.S.
In other words, if Wal-Mart buys TVs from China to sell in its U.S. stores, Wal-Mart pays the tariff when it receives the TV’s from China. Wal-Mart can, of course, increase the price of the TV to absorb the cost of the tariff, meaning the tax is really paid by the person trying to buy an affordable TV. Wal-Mart might buy more TVs from a U.S. company, creating some jobs. However, in addition to higher production costs, less competition means the U.S. TV companies also can increase their prices. So, at the end of the day, all the TVs in Wal-Mart are going to be more expensive.
During Trump’s first term, for example, tariffs were placed on washing machines. One study found that approximately 1,800 new jobs were created at Whirlpool, Samsung and LG factories in the U.S. However, according to the same study, in the months following those tariffs, prices for washers and dryers increased as well, by $86 and $92 per unit, respectively.
As Trump himself has noted about the impact of his proposed new tariff policies when asked if he could “guarantee” that it would not raise prices: “I can’t guarantee anything.”
‘Benefits?’
For the working class, understanding these trade-offs is crucial. What can benefit one subset of our class, can hurt the other, and in both senses “hurt” and “help” are relative concepts. Autoworkers, for instance, suffer on the job injury rates twice as high as workers overall. At the Rivian Automotive electric vehicle factory, for example, workers sustained injuries as serious as cracked skulls, bone fractures, back lacerations that required surgery and even amputated fingers.
So, increasing “manufacturing jobs” is no panacea, even if the salaries are higher than in other working-class sectors. Nonetheless, the appeal of tariffs to many is that it will bring overseas manufacturing jobs back to the U.S. In Trump’s own words:
This new American industrialism will create millions and millions of jobs, massively raise wages for American workers, and make the United States into a manufacturing powerhouse like it used to be many years ago.
The year 1979 was the peak of manufacturing employment in the U.S., with 19.5 million employed. Currently there are 12.8 million manufacturing workers, a difference of 6.7 million. During Trump’s first term, when he also pursued various tariffs, manufacturing employment, at best, increased by 350,000 jobs over four years. Even if you were to add in the best case scenario of the impact of the Inflation Reduction Act and the Infrastructure Investment and Jobs act, the possibility of more than a few hundred thousand manufacturing jobs a year being created seems highly unlikely. In such circumstances, manufacturing jobs reaching the level they were at in the year 2000, much less 1979, is a faraway prospect.
Further, most workers — roughly 90% — do not work in manufacturing, placing them on the losing end of cost increases associated with tariffs. One analysis estimates that the tens of millions of workers making less than $55,000 could see their cost-of-living go up between 5-6% from Trump’s tariff proposals. The heaviest burden falls on those making less than $28,600, which is already “insufficient to meet a one-person basic family budget in any county or metro area in the United States.”
The real motive
Trump’s tariff policy, from a worker’s perspective, is classic divide and conquer. It entices those struggling with the cost-of-living with the limited, possible opportunity at getting a higher-paying manufacturing job, while making life more expensive for everyone else, in particular the lowest paid workers. This faux-pro-worker policy, then, really has different goals. First and foremost is to kneecap China’s economy.
Since the earliest days of capitalism, tariffs have been used for such purposes. When combined with military power, tariffs are a way for capitalists in one country to maintain their advantages over others. As Fredrich Engels, pioneering Marxist, noted: “England thus supplemented the protection she practiced at home by the Free Trade she forced upon her possible customers abroad; and, thanks to this happy mixture of both systems, at the end of the wars, in 1815, she found herself, with regard to all important branches of industry, in possession of the virtual monopoly of the trade of the world.”
Significant tariffs on China directly (or third countries where Chinese businesses invest to export to the U.S.), combined with sanctions policy and military force, are designed to raise the “cost of doing business” with Chinese companies for companies from anywhere looking to also do business in the United States. The hope is to slow Chinese economic growth and development and/or forcing China to make various economic concessions to the U.S.
Another motivation for Trump’s tariff policy is to try to cover the holes he plans to create through his trillion dollar tax transfers to billionaires. Trump and the Republicans are promising to extend the tax cuts they enacted in 2017 at the cost of $4 trillion, primarily benefiting the ultra-rich. The average tax cut for the bottom 60% of the country would be $500, for people with $5 million in income, the average tax cut would be $280,000.
The only way to address the government’s debt, also a Trump promise, while pursuing these tax cuts (and more) would be destructive cuts to essentially all vital government programs, including Social Security. Since most workers certainly would not like to see their retirement cut so that millionaires can buy new cars and boats, tariffs are meant to try to keep enough critical programs afloat that it staves off mass anger.
Failure all around
Most estimates show Trump’s tariffs will not be enough to replace losses from his tax cuts for the ultra-rich, and real life has shown that Trump and Biden’s tariff policies have failed to hobble Chinese steel or auto companies. So, even considering its true purpose, Trump’s tariff proposals are unlikely to meet their goals. Not to mention they are going to increase costs for working class people, create — at best — a very limited number of manufacturing jobs, and possibly slow down the US and global economy leading to more economic misery for the working class.
Trump’s “protectionism” is no better than the alternative of “free trade.” They are both just capitalist strategies to maintain their stranglehold on wealth and power.
As we’ve noted before, “Relentless focus on profit is core to capitalism. This obsession with profit is the system’s motor engine.” Yet since 1969, profitability has been trending downward. The first response of the capitalist class, starting in the 1970s to promote policies that have become known as “neoliberalism”: expanding production in the developing world (globalization); attacks on public spending and progressive taxation (austerity); and a massive expansion of U.S. military power to subdue those who refuse to comply with the imperial agenda. Which all came with a heavy dose of “free trade” ideology.
These strategies failed to fully restore profitability and created their own contradictions, like the rise of China, that also created issues for the ruling class. So now, a new “protectionist” strategy has arisen to apply different medicine to the same illness. What is really needed is radical surgery, a total change in the economy, from profit first, to people first, or, socialism.
