Trump Tariffs Extort Trade Partners and Intensify China Hawkishness
Trump's international trade policy is an new phase of imperial exploitation and a reminder that American capitalism is declining.
On August 7th, sweeping tariffs went into effect on about 90 countries after Trump paused enforcement to allow countries to ‘negotiate’ a better deal. The baseline 10% rate remains for the negligible trade partners. Revised rates for 62 countries are also being introduced, which for most countries is a reduction from the rate initially threatened. Most are set at 15% while some are set at upwards of 50%.
When Trump first announced these rates in February, the initial percentages were calculated by taking “half of the rate of tariffs and non-tariff trade barriers imposed by other countries.” These were propagated to be ‘reciprocal’ because of the alleged trade barriers placed on the US. In reality, “the formula for the tariff placed on the United States by another country is equal to the trade deficit divided by imports.” This means the administration’s gripe is based on the trade deficit with countries, even though a deficit is not inherently bad. The US has been functioning in a trade deficit since the 1970s, which is to be expected when a country develops past its manufacturing phase.
While many countries have made some small concessions to ease the double-edged pain, America’s three biggest importers, China, Canada, and Mexico, which account for 40% of total imports, have resisted. Negotiations have stalled and don’t seem to be moving forward, especially since they know that blanket tariffs harm the US economy significantly.
Specific countries have been targeted with much higher rates after negotiations failed. India is now being hit with a 50% tariff as punishment for buying Russian oil, but it’s being delayed until August 27th. Canada, which makes up 12.4% of US imports, is also being punished with a 35% tariff for their recent decision to recognize a Palestinian state. Mexico, the biggest trade partner of the US, has refused to make any concessions to Trump in the face of a 25% tariff threat, which has now been delayed another 90 days. For Canada and Mexico, goods that fall under the USMCA, Trump’s replacement for NAFTA in his first term, are protected from these new rates. Brazil is being punished with a 50% ‘free-speech tariff’ because its former far-right President Jair Bolsonaro was convicted of abuse of power and fraud while facing investigations for embezzlement, defrauding public records, and inciting a coup.
Trump has displayed his stupidity in many ways, more so this term than the last. His agenda has been executed with crude vitriol and no regard for respectability found with the emotionally sterile neoliberals of the past. However, despite the popular liberal belief, the Trump administration is not incompetent; this is conscious policy. Since Trump has displayed obvious signs of dementia, we don’t know to what degree the final decisions come from Trump’s brain or the administration around him. Regardless, the resulting policy has a clear strategy. We saw this with the Iran conflict— calculated moves being made to pursue the neocon Zionist agenda. Similarly, the trade policy has an ideological backing, with various players guiding it along. I want to set aside the ‘Trump is stupid’ thought process for a moment to analyze what is really going on.
What is important is that the Trump administration never intended to allow these tariffs to be imposed long-term. Essentially, every economist and first-year undergrad agrees that broad tariffs would be disastrous for the US economy. It’s not even difficult to understand why: more taxation on imports raises the cost of goods, which decreases demand and slows the economy, while inflating the price of domestic products, which require raw materials. Look at this as an embargo. That’s the only accurate way to describe blanket tariffs in their effect.
There is no feasible way that the tariff strategy was going to work the way Trump initially said. The stock market in March already began to crater at the mere fear of them going into place. It prompted businesses to purchase as much stock as possible before being charged upwards of 145% extra to import goods. In just that one week, starting on April 2nd, when the extreme tariffs were in place, some small businesses were slapped with a bill in the tens of thousands of dollars. On a nationwide scale, commerce would come to a screeching halt, and the stock market would have begun to plummet, followed by skyrocketing inflation as there would be no new supply coming in.
Maybe Trump is diluted enough to believe he knew better than every economist on Earth. He certainly wouldn’t be the first nepo baby to narcissistically believe they’re smarter than everyone. Or maybe this was his plan all along. Either way, at some point, the billionaire elites had to step in, have a meeting, and explain to Trump the consequences of his actions. According to the Wall Street Journal, on April 9th, Peter Navarro, the tariff czar, was in a meeting away from Trump, so Scott Bessent and Howard Lutnik rushed into the Oval Office to persuade Trump to pause the tariffs, which he subsequently agreed to. Two days later, the market rebounded, and Trump invited billionaires Charles Schwab and Roger Penske to the White House, where they bragged about how much money they made from the tariff pause announcement.
Even if we take seriously the flawed goal of the tariffs, which is to bring manufacturing back to the US, this country doesn’t have the capacity to start up factories overnight, and there is hardly a desire among the highly developed workforce to take on manufacturing labor again. It’s an attempt at moving backwards to achieve something the country doesn’t need. What the country actually needs is to move into the next stage of development, which involves large-scale infrastructure projects like mass renewable energy and mass transport networks. These are things that American market capitalism is unable to provide due to the profit motive. Private companies lack the ability to build high-speed rail lines because there is next to no profit incentive, even though it would help society tremendously, and the whole system would gain from it a thousand times over. For as much as Trump is hailed as a master of business and capitalism, it seems he doesn’t understand the basic mechanisms which make such a system function.
Still, I prefer not to simplify it to ‘Trump is so stupid he doesn’t know how tariffs work,’ because it’s not just about the tariffs themselves. These are being used as tools for extortion.
The Trump administration is testing how much economic might the US can exert on other countries. Turns out, it’s still quite a lot. Much of the world just rolled over rather than banding together and fighting back. Japan did threaten to sell off US bonds and try to manipulate the dollar, but that was short-lived. For most countries, capitulating causes less short-term pain even if their populations want to resist. Some notable concessions that were extracted from the tariffs include:
🇪🇺 European Union (13.7% of US Imports)
20% tariff threat → 15% tariff imposed
Carveouts of raw materials with no restrictions
EU buys $750 billion of energy products
Investment of $600 billion in US infrastructure and industrial facilities
🇯🇵 Japan (4.5% of US Imports)
25% tariff threat → 15% tariff imposed (most goods and vehicles)
Japan pledges to invest $550 billion in US energy exports, semiconductors, and agriculture
Japan’s rice exports are now automated and on a mandatory quota
Japan will purchase 100 Boeing planes and $3 billion in US military equipment
🇻🇳 Vietnam (4.2% of US Imports)
46% tariff threat → 20% tariff imposed
84% tariff threat on trans-shipped products from China → 40% imposed tariff on trans-shipments
Removal of all tariffs on US imports
Vietnam will institute stronger customs enforcement, prevent trans-shipment via digital certification systems, and drop anti-dumping penalty enforcement
🇰🇷 South Korea (4.0% of US Imports)
25 % tariff threat (vehicles, electronics, others) → 15% imposed, elimination of duties on US imports
Investment of $350 billion in US industries (ships, semiconductors, batteries, biotech)
Japan buys $100 billion in US natural gas and crude oil
Reduced restrictions on vehicle and agricultural trade
🇵🇭 Philippines (2.4% of US Imports)
20% tariff threatened → 19% tariff imposed
Removal of all tariffs on US imports
Philippines pledges to open up to US markets (no exact investment outlined)
🇬🇧 United Kingdom (2.1% of US Imports)
25% tariff threat (50% on steel and aluminum) → 10% tariff imposed
Carveouts for US steel with no restrictions
UK removes quota restrictions on $5 billion of ethanol and beef exports
🇲🇾 Malaysia (1.6% of US Imports)
25% tariff threat → 18% tariff imposed
Removal of all tariffs on most US imports and some non-tariff barriers
Malaysia buys $150 billion in US semiconductors, aerospace, and server hardware
Malaysia buys $3.4 billion per year in US energy exports
Malaysia invests $70 billion in US agriculture
🇮🇩 Indonesia (1.1% of US Imports)
32% tariff threat → 19% tariff imposed
Indonesia drops duty fees on most US goods and removes all non-tariff barriers
Investment of $4.5 billion in US agriculture
Indonesia buys $15 billion in US energy exports and at least 50 Boeing jets
Indonesia will accept the US vehicle and drug safety standards
🇮🇱 Israel (0.7% of US Imports)
17% tariff threat → 15% tariff imposed
Removal of all tariffs on US imports
🇿🇼 Zimbabwe (0.002% of US Imports)
18% tariff threat → 15% tariff imposed
Removal of all tariffs on US imports, the first country to ask for a deal
What we see happening is that these countries are being muscled into more favorable trade relations, effectively deepening control over them.
The European Union, the UK, Japan, South Korea, and others are all subservient to the US both militarily and with their monetary policy. They don’t have a choice unless they dare to finally oppose American global hegemony. Thus, Trump has been able to squeeze them for investment, free trade agreements, and direct purchasing of goods. These countries chose the lesser of two bad options, one short-term and one long-term: accept the bad trade terms but make profitability more difficult domestically, or rip the band-aid off and cut ties with America, which dominates their financial markets, debt, monetary reserves, and can sanction them in a variety of ways. All they can do now is hope Trump doesn’t come back to them in a few years with an open palm.
The same goes for African and Latin American countries that have endured decades of subjugation under global neoliberal institutions, namely the IMF and World Bank. Far worse than Europe, these nations have been forcefully underdeveloped by the imposition of austerity and dollarization, which benefits the American and European corporations. The effects of forced privatization have devastated their countries, and many still hardly receive any of the profits made from the extraction of their minerals, crude oil, and natural resources. Some nations, like Argentina, are still suffering under crippling debt, while others, like Brazil and Mexico, have begun to resist Western institutions that seek to exploit them for cheap labor and exports.
Trump has escalated this extortion to a new level, making it far more obvious what is happening. If before, America was stealing lunch money subtly, now America is beating these countries up for it. Syria, after the overthrow of the Assad regime, has a shattered economy and multiple ongoing crises. Now led by leader Amed al-Shara, he traded oil fields to US firms and privatized parts of the economy in exchange for lifting sanctions.
When Rwanda-backed M23 rebels attacked the Democratic Republic of the Congo in January, about 7,000 people were killed and half a million were displaced. A humanitarian crisis was triggered, and fighting didn’t cease until an agreement was reached in July. The US is brokering a deal later this month between Rwanda and the Congo to outline a permanent peace accord. Trump has already offered security aid to help the Congolese military, but in exchange for access to cobalt, lithium, copper, and other minerals.
The worst of which was Ukraine. Trump has made it no secret that he wanted to end the war by cutting aid to Ukraine on the campaign trail. Now in office, Trump did exactly that, abruptly cutting aid in February. Trump forced President Zelenskyy to come to the White House to essentially be humiliated while he held the future of his country over his head to get concessions. Though the continuation of the war is very much in the US imperial interest as a proxy against Russia, Trump made sure to extract as much as possible from Ukraine’s current crisis. Zelenskyy reluctantly agreed after some back and forth. Trump then resumed military aid and also approved a new package of Ukraine spending through the defense appropriations bill. In exchange, the US will receive 50% of all future revenues from Ukrainian state-owned natural resources, including minerals, oil, and natural gas. This is the forced trade of sovereignty for raw materials, which is to say extortion.
Trump attempted this strategy on China by imposing a massive 145% tariff to which they responded with an equal levy. The CCP has no reason to abandon their ambitious growth project to satisfy the US, which relies on them to maintain the 80-year hyper-consumerist American culture. In fact, China’s exports exploded in April as countries turned to them as a trade partner to cut ties with the erratic US leadership. China knows the US is entirely dependent on it for cheap products; its exports are what prop up American capitalism. Much to the confusion of conservatives like Trump, America is not a manufacturing country anymore; it is a service economy based on consumption, and it cannot simply overturn this fact overnight. So Trump had to back down; a trade embargo with them would be suicide. The stock market would crater, and China rightfully called his bluff.
The war on China was not entirely Trump’s idea. Many neoliberal types like Biden have been ramping up this fear-mongering in recent years to protect the little manufacturing left in America, but not like this. The ideological underpinning comes from Trump’s Senior Trade Counselor Peter Navarro, who has spent the past 25 years zealously proclaiming that China is a grave threat to America with near-biblical conviction. Navarro’s magnum opus was a book and film called ‘Death By China,’ which paints China as a hyperbolic evil military and economic threat that is hell-bent on destroying America. The irony is, of course, that China has not attacked another country in 45 years, whereas the US has been at war for almost that entire period, most of which has been offensive and imperialist.
The truest embarrassment of Navarro’s philosophy is that China has been playing the game of capitalism far better than America ever could. After the communist revolution was diluted down to reformist capitalism in the Deng Xiaoping era starting in 1978, China’s economy has grown at an unprecedented 9.03% per year on average. Although China today is far from resembling a socialist economy where workers rule, its state-planned capitalist model is beating America’s neoliberal market capitalism at its own game. The CCP is not afraid to work against the interests of the capital owners to pursue long-term growth, whereas the American state must bend to the will of the billionaire elites who only care about their stock price.
This strategy was no secret either. CCP leaders openly announce the country’s economic plan every five years at the CCP Congress. Their model proved that export-oriented development is the ideal path to sustainability for a developing nation. China seized the opportunity when the United States was deindustrializing and becoming a service economy, where it oriented itself toward manufacturing mass consumer goods. This paid off immensely as China’s prosperity today was funded by millions of credit cards in the wallets of Americans. Contrary to Navarro’s conclusion, no exploitation happened here; China had the means to provide tons of cheap labor and responded to market demand. Now, the challenge they’re facing is how to transition from a manufacturing powerhouse to a service economy with a rapidly growing middle class.
We get the impression that American leaders feel defeated and know that, the way their economy is structured, they will not be able to exploit the world to combat the declining rate of profit much longer. Neoliberal China hawks are solemnly admitting this, exemplified by headlines like Max Boot’s opinion piece in the Washington Post titled, “China is Winning the Trade War Trump Started.” America will soon have no choice but to accept China’s dominance in the world economy. Eventually, American elites will have to turn inward to extract more profit, setting off an authoritarian cycle. Either that or capitalists will have to find more creative ways to exploit the rest of the world because China is not going anywhere; they are the alternative to American imperialism.
As mentioned earlier, this is all a direct result of the falling rate of profit. American capitalism necessitates new markets, cheaper resources, and new ways to charge more for less. If they can’t make more profits infinitely, the whole system falls apart, and that’s precisely the slow process we’re watching unfold. You can only subdivide and automate labor so much before the elites own almost everything and the poor own almost nothing. America will never be ‘great again,’ and we know this because of the structure of the system. Compared to 50 years ago, there will never be rent as cheap as it was then, college will not cost the same as it did, there will never be real wages as high as then, there will never be cheaper groceries or gas cheaper than back then—because in order to undo the dramatic increases in capital to return those better conditions to the workers, you have slow the rate of profit. What happens when profit slows down? A recession. Economic pain. Implosion.
Capitalism is a system that necessitates infinite growth on a planet with finite resources. Capitalism cannot grow forever; eventually, it bumps up against the limits of reality. Either this endless consumption burns the planet alive, or the workers are forced to break their chains and resist. The only solution is to unapologetically pursue a socialist revolution— defeating capitalists in the class struggle, abolishing profit, abolishing private property, and sharing in the fruits of our labor.