While the GDP report for January through March showed negative growth, this was mainly because of the large surge in imports to try to beat Trump’s tariffs. If all other sectors had stayed the same, the import surge would have dragged the economy down by 4.7%. Then in the second quarter of the year, imports dropped by an even larger amount as Trump’s tariffs began to bite, which would have caused GDP to grow by 5.2%.

So, when we wash out the boom and bust in imports, by putting the first two quarters together, there was an average of 1.25% annual rate of growth. Because there was also a big shift in inventories of unsold goods, which surged in the first quarter as imports piled up, and then dropped in the second three months as they were sold off, economists often look at final sales to domestic private purchasers, which also excludes changes in government spending. This figure was only up 3%, as compared to a 5.3% rate of growth in the second quarter of 2024.

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This is the third time that Trump has backed off after CEOs yanked at his leash. First it was the suspension for 90 days of Trump’s “reciprocal tariffs” on the world following comments by the CEO of JP Morgan Chase, the country’s biggest bank, Jamie Dimon. Next came the exemption for cell phones and computers from the 145% tariffs on Chinese imports after a talk with Apple CEO Tim Cook. This time it was a meeting with the CEOs of Target, Walmart and Home Depot that led to the latest softening of Trump’s stance and hints from his administration that he will lower tariffs against China.

Trump is also finding it hard to make deals with other countries. After strongly hinting that a deal was being done with Japan, one of the United States’ foreign policy and military partners, nothing concrete came out of U.S. meeting with Japanese trade officials. One problem, according to a former U.S. trade official, is that the U.S. side could not state what they wanted from Japan. Another problem was that Trump administration is trying to get other countries to limit their trade with China, despite China being Japan’s largest trading partner. In fact, almost all countries in the world, with the exception of those in western Europe, North America, Central America, and the northern part of South America, trade more with China than the United States.

The problem is that while Trump attacks other countries for “taking advantage” of the United States and stealing jobs from American workers, it is in fact U.S. corporations that have been off-shoring their jobs for decades. Just this week, the Wall Street Journal reported that Chevron, Exxon, and other U.S. oil companies are offshoring more engineering and other skilled work to India.

#SanJoseCA #CA #CapitalismAndEconomy #Tariffs #Trump #TradeWar

On the other hand, China does not accept this. China was fairly restrained in responding to the first two 10% tariffs leveled by the United States. But once the United States kept raising tariffs, China responded in kind, eventually raising their tariffs to 125% on U.S. items. China stands ready to begin negotiations with the appointment of a chief trade negotiator, Li Chenggang, who was China’s chief negotiator at the World Trade Organization.

China has been actively increasing its domestic market to rely less on trade for the last 15 years. Further China has expanded trade with other nations to reduce the percentage of exports going to the United States. 25 years ago, China was the leading trade partner to less than 20 countries, all in Asia, Africa and Cuba. Last year it was the United States that was the leading trade partner to less than 40 of the 190 countries and regions of the world, almost all in the Americas and Europe. China was the leader in trade with almost all developing countries and even led in trade to U.S. military allies such as Japan and South Korea.

Another thing would be to look at the details of who buys what in the China/U.S. trade relationship. The single largest product that China buys from the United States is soybeans, which China can buy from other countries such as Brazil. The same goes for the second largest products, oil and gas, which China can buy from many other countries such as Russia, Saudi Arabia, Iraq and Oman.

On the other hand, Chinese machines are the single largest item bought by the United States – not consumer goods as many people think. While the United States does have other sources of machinery, to import more from Mexico, Japan, Canada and Germany would still cost significantly more, as Trump has tariffed all these countries. The second biggest U.S. import from China is nuclear reactor equipment. Russia is a leading exporter in this field, but U.S. sanctions prevent buying from them anymore.

In particular, the United States (and the rest of the world) relies on China as a source of so-called “rare earth” metals – which are not really that rare. While deposits of these rare earths are widespread, China has a near monopoly on (92%) the processing of these metals from their ores. China’s rare earth processing is dominated by state-owned enterprises or SOEs. One of the roles of SOEs in China’s socialist economy is to have lower profit margins in order to provide raw materials at lower prices, which benefits China’s manufacturing industries.

China has begun to restrict the exports of rare earth metals and magnets made from them to the United States. These are used in both military and industrial processes and could impact both the U.S. war machine as well and companies manufacturing MRIs and automobiles, as well as other industries. While the United States does have its own rare earth mines, it would take years to develop processing facilities, and China also has the most advanced technology for processing rare earth ores.

China recently stopped its airlines from taking deliveries of Boeing jetliners. This is a blow at one of America’s giant corporations, which has been weakened by a series of accidents. While many of the commercial jets in China are Boeings, China has been moving away from Boeing for years and now flies more Airbuses than Boeing airliners. Further, Airbus has an assembly plant in China, whereas Boeing does not.

China also has a new Comac C919 airliner. It is a narrow body airliner like some of the Boeing 737 or Airbus A320 airliners. While it does rely on some U.S.-made parts, it can still import these parts – at least for now. But even if the U.S. expands its sanctions to commercial airliner parts, this will lead to China accelerating its manufacturing of substitute parts.

Finally, China has a resource that the United States doesn’t even have – the world’s longest high-speed rail system in the world. In fact, half of the world’s high speed rail tracks are in China. So even if the U.S. managed to somehow shut down China’s supply of planes, people could still take the train.

Last but not least are the two economic systems involved. Trump’s Secretary of the Treasury, billionaire Scott Bessent, said in reaction to China matching Trump’s tariffs, “they’re playing with a pair of twos.” This gaming mentality is common on Wall Street where Bessent ran a hedge fund, and represents the outlook of finance capital, a feature of monopoly capitalism.

On the other hand, China is a socialist society, and rather than gambling on a trade war, China has a long-term plan. “Made in China 2025”, adopted by the Chinese government ten years ago in 2015, was their guide to changing from being the world’s factory based on low labor costs to competing or leading in higher-technology industries. In an article by the American business news source Bloomberg, China was said to lead the world in five industries: drones, electric vehicles and lithium batteries, graphene (high-tech carbon), high speed rail, and solar panels. The success of the Chinese electric cars is seen in Chinese BYD vehicles passing Tesla.

In most of the other areas, including ship building, pharmaceuticals, agricultural machinery, machine tools, robotics, artificial intelligence (Deepseek) and semiconductors, Chinese products are competitive. Only in one industry, commercial airlines, is China still behind world leaders such as Airbus and Boeing. Because of China’s advances the Trump administration is limiting AI chip exports and is developing plans for tariffs on Chinese ships, pharmaceuticals, cell phones and computers (the last two would be general, not just levied on Chinese goods).

So, while China is looking to and making its way to the industries of the future, Trump wants to return to the past, extolling 19th century industries like iron and coal and gambling on a trade war.

#SanJoseCA #CA #CapitalismAndEconomy #Tariffs #Trump #China #TradeWar

Canada immediately hit back, with tariffs on $30 billion (Canadian) or about $20 billion U.S., with tariffs on another $125 billion (Canadian) or about $80 billion U.S. of U.S. goods, to go into effect in three weeks. China also hit back, putting 10-15% tariffs on U.S. agricultural exports, to go into effect March 10. Mexico’s response was more subdued, with the Mexican president saying that she would announce their response on Sunday, March 9.

While the immediate counter-tariffs were somewhat restrained, as both Canada and China would like further talks, the Canadian Prime Minister and the Chinese representative from the Foreign Ministry used very strong language.

Prime Minister Trudeau of Canada described Trump’s tariffs as an existential threat to the country, saying the tariffs are designed to cause “a total collapse of the Canadian economy because that will make it easier to annex us” referring to Trump’s repeated desire to make Canada a 51st state. Public sentiment in Canada has turned anti-American, with Canadian hockey fans booing The Star-Spangled Banner when it played at a professional hockey game in Canada. China’s foreign ministry representative also used strong language, saying “if war is what the U.S. wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end.” 

The immediate impact of the tariffs will be to cause a logjam of imports and exports at the U.S. borders with Canada and Mexico. While many Chinese goods have been placed under tariffs since Trump’s first term, most goods crossing to and from Mexico and Canada largely had no tariffs and imposing them will be a logistical nightmare. This will lead to shortages, somewhat like the early days of the COVID pandemic, which also disrupted trade.

The second impact will be higher prices. Some of these price increases have already started. Others will show up in days. The amount that consumers will have to pay will vary by product. If there is a lot of competition in terms of other countries making the item, as in the case of shoes, the 20% tariffs on China will mean about an 8% increase in prices. More expensive products sold to people willing to pay more will see a larger pass-through to the consumer, such as iPhones, which could rise 15% in price. Finally, where there are almost no alternatives, such as avocados from Mexico, the 25% tariff could mean a 20% jump in prices.

One of the most expensive goods to be hit with tariffs will be automobiles, where U.S, Japanese and German corporations have factories. Here prices could rise by 15% or more, with the 25% tariffs on Mexico and Canada. Over the last 30 years these car corporations have built integrated supply chains spanning all three countries in the wake of the NAFTA free trade agreement. Many auto parts cross the border many times, meaning that the 25% tariff might be applied not once, but multiple times.

Not only will the tariffs raise prices, they threaten economic recessions in Canada, Mexico and even in the United States. While the United States is less dependent on trade than Canada and Mexico, the Federal Reserve Bank of Atlanta revised their estimate for U.S. Gross Domestic Product for the first three months of the year down to a negative 3.5% growth. This sharp drop in production, while not officially a recession, would typically be seen in a recession. 

To make matters worse, Trump is planning for even more tariffs. On March 12, Trump will put 25% tariffs on steel and aluminum. Trump has said that, on April 2, he will start tariffs on cars, medical drugs and semiconductors. Trump also plans to announce matching tariffs for every country, as his team is searching for foreign taxes that they could label as tariffs.

 #SanJoseCA #NAFTA #TradeWar #Trump #Tariffs

A new 25% tariff on lithium ion batteries as well as components and raw materials for lithium batteries for EVs will go into effect at the end of September, while lithium batteries, components and raw materials for all other uses such as electric scooters, power tools and toys will go into effect in 2026.

A 50% tariff will be placed on imports of Chinese semiconductors. Ironically, China’s semiconductor industry is growing in part because the United States is strong-arming U.S. and foreign chip makers to stop selling chips to China. China has become the world’s leader in producing materials for solar power, and Chinese polysilicon and silicon wafers will also face a 50% tariff.

A wide variety of imports from China, ranging from protective personal equipment (PPE) such as face masks and medical gloves, to ship-to-shore cranes used to load and unload container ships, to steel and aluminum, will face tariffs of no less than 25%.

Last but not least, the Biden administration is calling for the elimination of the “de minimus” exemption that allows packages with value of less than $800 to be exempt from tariffs. This will impact major e-commerce firms such as Amazon as well as new Asian firms such as Temu and Shein, all of which rely on shipping direct from China.

While the Biden administration said that the tariffs were in response to “harmful policies and practices” of China, the fact is that China has just pulled ahead of the United States in a number of industries. The CEO of Ford Motors has called Chinese EVs an “existential threat” because of their ability to offer better technology at lower prices than U.S. car corporations.

The tariffs on PPE are a threat to the health of Americans. During the pandemic, shortages of PPE were widespread in the United States due to the lack of American production. Even after the pandemic, rather than relying on subsidies for production and direct purchases by the Federal government to guarantee demand and stockpile health care essentials, the government would rather make them more expensive which will reduce their use and make Americans' health care even more expensive.

Tariffs are a type of sales tax that fall on imports. Since sales taxes are regressive—that is, their burden falls more heavily on lower-income households—the Biden administration tariffs will do the same. This is especially true if the government eliminates the de minimus ban which mainly fall on more inexpensive consumer goods bought by working and poor people.

Other tariffs on so-called “intermediate goods” that are used in production, such as batteries as well as polysilicon and silicon wafers, will make U.S. made products more expensive and slow efforts to reduce carbon emissions. The tariff on ship-to-shore cranes will make imports in general more expensive in the future and will just lead to more imports of these cranes from other countries since the United States does not produce any.

This is true in general for tariffs on imports from China. Since the U.S. began the trade war under the Trump administration in 2017, U.S. imports of goods from China are down more than 15%, but total imports from all countries are up 30%.

For decades the United States promoted free trade and in particular the free movement of capital. But as the U.S. economy declined relative to other countries, going from 40% of world Gross Domestic Product in the 1950s to only 20% today, the United States has become more protectionist. The big break came under the Trump Administration, but the Biden Administration has continued and escalated the trade war with China.

#SanJoseCA #CA #CapitalismAndEconomy #China #Tariffs #TradeWar

Earlier in the day China announced that it was increasing tariffs on U.S. exports from 10% to 15% starting September 1 and was resuming the 25% tariff on imported cars on December 15, in response to new U.S. tariffs set to go for those two dates. Stocks fell as investors began to give up hope that China would back down and give in to some of U.S. demands.

Then Federal Reserve (the U.S. central bank) Chairman Jerome Powell indicated that the Fed would do another cut in interest rates at their next meeting in September. But he also cautioned that monetary policy – raising and lowering interest rates – could not counter the escalating trade war between the United States and China. U.S. stocks then made up their losses until President Trump unleashed his tweets.

Trump tweets included statements like “We don't need China” and that “[we] would be better off without them.” He then ordered U.S. companies to “immediately start looking for an alternative to China.” Even though the president has no authority to order businesses to leave China, the fear grew that Trump was going to escalate the trade war even more. Sure enough, later in the day, the administration announced that current 25% tariffs on about half of imports from China would be raised to 30% on September 1. Further, the tariffs on the other half of imports from China that are set to be imposed on September 1 and December 15 would rise from 10% to 15%.

The fact of the matter is that many U.S. and other foreign companies that had offshored production to China had been moving their factories to other countries because of the rapidly rising wages in China. But no other country has the combination of infrastructure such as transportation and ports, large skilled workforces, and a dense supply network of companies providing parts as China.

While the first rounds of Trump's tariffs largely avoided consumer goods, the tariffs set for September and December would include a wide range of consumer goods including cell phones, computers, other consumer electronics, shoes and clothing. These tariffs, which are taxes on imports, will lead to higher consumer prices, causing hardship for working-class families who are already trying to get by on their stagnant wages through working longer hours, taking on more debt and buying cheaper imported goods.

Trump's trade war is also damaging the international economic order set up by the United States after World War II. This modern era of freer trade was meant both to reinforce U.S. economic dominance over the capitalist world as well as the anti-Soviet and anti-socialist alliance headed by the United States. But this free trade regime is unraveling with the rise of other capitalist economies such as Germany and Japan, as well as the integration of socialist China into the world trading system.

In addition to the growing signs of a coming recession, there are increasing concerns on Wall Street that tensions in the capitalist world will increase the chances of a more serious economic crisis.

#SanJoséCA #International #OppressedNationalities #US #Asia #PeoplesStruggles #AsianNationalities #China #stockMarket #DonaldTrump #tradeWar

San José, CA – On Wednesday, August 14, the U.S. stock market tanked, with the Dow Jones Industrial Average down 800 points, or 3%. The technology-heavy NASDAQ index also fell 3% and the S&P 500 fell just shy of 3%. This is the third day in a row of major market moves: Down more than 450 points on Monday, up 375 points on Tuesday, and now down again.

The Monday move came on because of growing recession fears, but the stock market bounced back on Tuesday, when Trump announced that he was postponing the 10% tariff on imports from China on more than half of the goods originally scheduled to be tariffed September 1. The postponement came on cell phone, computers, toys and other goods that make up more than 75% of U.S. imports that come from China, as well as baby supplies deemed necessary. However more than $100 billion in imports from China are still on track to face tariffs next month. These are mainly consumer goods, with women and girls clothing among the hardest hit.

While Trump tries to come off as a tough guy and hard negotiator, the fact of the matter is that he blinked in the face of Chinese resistance. Trump also admitted for the first time that U.S. consumers would be hit, whereas before he maintained that China was paying the tariffs. The postponement allows stores to stock up for their holiday sales without paying the tariffs.

But despite the relief rally on Tuesday, on Wednesday things went from bad to worse. First came disappointing economic reports from China. Over the last ten years China has made a lot of progress in bringing down its overall trade surplus (selling more exports than it imports). By ramping up its imports, the Chinese economy has become ever more important to other countries’ economies, including for example, U.S. farm exports. While its economic growth is still awesome by any other large economy’s standards (still about 6% as compared to 2 to 3% in the United States and even less in Europe and Japan), any slowdown in Chinese economic growth will affect other countries.

Then, as the world turned, there came a report out of Germany that their Gross Domestic Product (GDP, or the total production of final goods and services) actually contracted by a small amount in the second quarter of this year. Germany has the largest economy in Europe and is the fifth largest in the world. Germany is also the world’s third largest importer of goods and services, so like China, any slowdown will impact other countries.

Then when financial markets opened in the United States, interest rates on the ten-year U.S. Treasury Bonds briefly fell below the interest rate on the two-year bond. This was another ‘inversion’ of the bond interest rate yield curve, where typically higher long term interest rates fall below shorter term ones, indicating the economy will be much worse in the future. It is seen as one of the strongest financial market warnings of a coming recession.

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Bank of America raised the risk of recession in the next year to one in three, while U.S. bond interest rates continued to fall. The ten-year U.S. Treasury Bond interest rate fell again to about 1.5%. Lower bond interest rates show that investors expect economic growth to slow at best, and the economy to fall into recession at worst. The so-called ‘inverted yield curve,’ where long-term interest rates on bonds fall below shorter-term interest rates continue to flash a warning of a coming recession.

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San José, CA – On Monday, August 5, China replied to Trump’s new tariff threat by calling off the purchases of U.S. agricultural products and weakening government support for the RMB, China’s currency. In response the RMB fell to 14 U.S. cents, meaning it will take slightly more than 7 RMB to buy one U.S. dollar. Soybean prices also fell, as China is the largest foreign buyer of U.S. soybeans.

The lower value, or depreciation, of the RMB will partially offset the impact of Trump’s new tariffs, or tax, of 10% on all remaining U.S. imports of goods from China. These tariffs, which include many consumer goods such as cell phones and other consumer electronics, baby items and toys that were not covered by Trump’s earlier tariffs. This tax is paid by U.S. importers and will be passed on to consumers.

The price drop in soybeans and other agricultural products such as cotton, where China is a major importer, will hit U.S. farmers already suffering from historic flooding driven by climate change. While the Trump administration is paying out billions to make up some of these losses, it does not cover the total cost to farmers.

Stock markets in the United States fell the most in one day this year, extending their losing streak to six business days. Hardest hit was the technology corporation-filled NASDAQ index, which fell more than 3%. Technology companies are deeply involved in trade with China, both importing and exporting. The headline Dow Jones Industrial Average fell almost 3%, or more than 750 points, while the broader S&P 500 Index also fell almost 3%. Stock investors feared that the escalating trade war would hurt economic growth and thus corporate profits and stock prices.

The growing fear of recession boosted the buying of bonds, which provide a fixed interest payment. Bond prices went up, driving the interest rate on the benchmark ten-year U.S. Treasury bond down to 1.75%. Just a year ago the interest rate on ten-year treasury bonds was over 3%. This means that longer-term bond rates are significantly lower than short term (six months or less) bond interest rates, which are near 2%. This so-called “inverted yield curve” is one of the best financial predictors of a coming recession.

The fear of recession slammed stock markets around the world, with most markets falling more than one and a half percent from Japan to Germany. Fear of a slowing economy also hit oil prices, which fell about one and a half percent.

#SanJoséCA #International #OppressedNationalities #US #Asia #PeoplesStruggles #AsianNationalities #China #Socialism #stockMarket #DonaldTrump #tradeWar

San José, CA – On Thursday, July 31, President Trump tweeted that he would be imposing new tariffs, or taxes, on the $300 billion of Chinese goods not covered by his 25% tariffs. U.S. stocks took an immediate dive, giving up all of their 300-point gain to drop 280 points for the day. They continued to fall on Friday, leading to the worst week for U.S. stocks all year.

Despite what Trump says, tariffs are taxes that are paid by U.S. importers. Up to now, most of the Chinese goods placed under heavy tariffs have not been consumer goods. But the new tariffs mainly hit consumer goods such as cell phones, consumer electronics, toys, and baby supplies. U.S. workers could see higher prices going into the upcoming holiday season.

Trump also claims that his goal is to bring down the U.S. trade deficit, where the U.S. imports more goods and services than it exports to other countries. But despite his tariffs, the U.S. trade deficit grew to a record dollar amount last year, as other countries fought back and retaliated against U.S. exports.

The U.S. and China had just met to discuss the trade war and had agreed to meet again in mid-September. By placing tariffs on even more Chinese goods, Trump is trying to bully China into changing its socialist economy. While his bullying tactics can work with smaller economies like Mexico and Guatemala, China is the world’s second largest economy and has had an independent leadership since the Chinese revolution in 1949.

The new Chinese ambassador to the United Nations, Zhang Jun, said, “China’s position is very clear that if the U.S. wishes to talk, then we will talk, if they want to fight, then we will fight.” With the Chinese leadership beginning a two-week annual policy conference, their specific response may take a few weeks. But the trade war is likely to get worse in the coming weeks.

Trump’s trade war is just one of the factors weighing on the world capitalist economy. The European economy is already in the doldrums, and worries are growing about the impact of a no-deal Brexit in October. The Japanese economy is also slow, and Japan has copied Trump by restricting exports of chemicals used in making semiconductors under the guise of “national security”. Here in the United States, business investment and construction are slowing, one of the most sure-fire warnings that a recession is on the way. While the U.S. economy is relatively strong, with low unemployment, it is harder and harder to see how it can continue to grow with one problem after another cropping up.

#SanJoséCA #International #OppressedNationalities #US #Asia #PeoplesStruggles #China #Socialism #DonaldTrump #tariffs #tradeWar #TrumpChina

Trump threatened to raise the 10% tariffs, or taxes, to 25%, on about half of goods imported from China. In addition, he threatened to place 25% tariffs on almost all other Chinese-made goods coming to this country. These new tariffs cover a wide variety of consumer goods such as cell phones that escaped his first round of tariffs.

Despite the Trump administration’s growing use of tariffs, starting with washing machines and solar panels, then going to aluminum and steel, and finally on hundreds of billions of dollars of Chinese goods, the U.S. trade deficit actually grew last year. Perhaps frustrated by the failure of his policies to boost U.S. trade, Trump is threatening to escalate the trade war with China and is also laying the groundwork for tariffs on imported cars. The Trump administration is seeking to label imported cars a ‘national security’ threat, despite the fact that they are almost all from Canada, Mexico, Germany and Japan.

U.S. companies have mainly reacted by raising prices, not by increasing production. After the 25% tariff on washing machines, prices on both washing machines and dryers (which were not subject to tariffs but which are often sold with a washing machine) both have gone up about 12%. In the case of steel, the 25% tariffs were almost matched by a 22% rise in the price of steel. While this has fattened corporate profits, it has not benefited workers.

Other businesses are bracing for possible retaliation if Trump goes ahead with tariffs on more Chinese goods or on cars. After the imposition of tariffs on Chinese goods, U.S. exports of soybeans to China, which was almost half of U.S. production, fell to almost zero last year. While almost no cars are imported from China (GM imports a small number of smaller SUVs that it makes in China), a good number of car parts are, which will increase the cost of making trucks and SUVs in the United States.

Like white supremacists who promote the idea that whites are ‘victims’ of Black people, Mexican immigrants and Central American refugees, Trump promotes the idea that the United States is victimized by other countries. Given that the U.S. is still the world’s largest economy and has dominated the economies of many other countries for years, the idea is ridiculous, but it helps to whip up racist fears.

#SanJoséCA #OppressedNationalities #US #PeoplesStruggles #WorkersAndGlobalization #economy #DonaldTrump #tariffs #tradeWar

San José, CA – While most Americans won’t have a ‘white Christmas’ this year, many of us will be looking forward to the displays of lights on many homes and businesses. Now the Trump administration’s escalating trade war with China threatens to dim this coming holiday celebrations – or at least make them more expensive.

On July 10 the Trump administration began another round of escalation of its trade war with China. Trump announced a 10% tariff on an additional $200 billion of Chinese-made goods. While the initial 25% tariff on $34 billion of imports from China had very few consumer goods, this broader list, which is almost 200 pages long with some 7000 types of goods, does.

One of those listed are Christmas lights. The U.S. imports over $500 million of these lights each year from China. These lights make up over 90% of the total light imports, meaning that U.S. buyers will not be able to switch to other countries to avoid the tariffs. If these tariffs go through they would raise the cost of holiday lighting.

There are a number of imports where the U.S. gets 90% or more of its imports from China. At the top of this list are laptop computers, which are valued at almost $40 billion. With 93% of all imported laptops coming from China, and almost no laptops being made in the U.S. (ironically, the only U.S.-made laptops are made by Lenovo, a Chinese company), another round of U.S. escalation is bound to hit more expensive items such as laptops and cell phones.

This is exactly what the Trump administration has promised to do when the Chinese government responds to the latest round of U.S. tariffs. China only imports about $150 billion of goods from the U.S., and is already placing tariffs on $50 billion of them in response to U.S. tariffs. But China also imports services such as U.S. movies (half the top-selling movies in China in the first half of this year have been U.S. films) and education (China is the single largest country of origin for international students and about a third of foreign students in the United States). U.S. corporations also have major investments in China, usually with a Chinese partner. General Motors actually sells more cars in China than in the U.S. under this arrangement (China is the world’s largest car market in terms of number of vehicles sold). China could use a variety of so-called “non-tariff barriers” to hit back at the U.S. tariffs.

Not only are prices on consumer goods likely to go higher as Trump escalates the trade war with China, but prices of U.S. exports to China are already heading down. Prices of soybeans are near a ten-year low and fell 15% last month alone. China is the single largest market for U.S. farmers exporting soybeans, taking about a third of all exports. The pain for U.S. workers and businesses is growing in the wake of Trump’s trade war.

#SanJosé #CapitalismAndEconomy #China #Trump #tariffs #tradeWar #holidays #Asia

This action against China is another sign of the rising power of trade hardliners in the Trump administration such as Peter Navarro, director of the White House Trade Council. Navarro was recently in the headlines for saying that there was a “special place in hell” for Canadian Prime Minister Justin Trudeau, after Trump refused to sign a statement of the Group of Seven (G-7) meeting of major capitalist countries. This hard line on trade can also be seen in the Trump administration’s imposition of tariffs on steel and aluminum imported from Canada, the European Union and Mexico on ‘national security’ grounds.

The Trump administration’s trade policies follow a mercantilist outlook that trade deficits are bad and that a country grows strong through a trade surplus. Mercantilism was adopted by early European colonial powers as they advocated taking colonies, taxing imports, subsidizing exports, and restricting trade to a few government sponsored monopolies. Many of the British colonists’ economic grievances against the King were caused by these policies.

The mainstream economic view of free trade was championed by Adam Smith, a British economist who published The Wealth of Nations in 1776. In his work, he used the term “the invisible hand” to describe the virtues of a free market, where small businesses would compete for customers by offering cheaper and better quality goods and services.

With free trade, countries would specialize, and Smith saw the British colonies as producing agricultural goods for British factories. While this was embraced by southern American plantation owners, who used slave labor to produce cotton for export, northern manufacturing interests wanted tariffs in order to develop American industries like weaving, with their cloth protected from cheaper British goods. These tariffs were passed in 1862 after the South tried to leave the U.S. over the issue of slavery.

As U.S. industries came to dominate the world capitalist economy, replacing Britain as the number one economic power, the U.S. took over Britain’s role as a champion of free trade. Towards the end of World War II, the U.S. set up a number of international institutions to bolster free trade and U.S. economic domination. The Bretton Woods currency agreement, which fixed foreign currency exchange rates where the U.S. dollar was paired up with gold to replace the British-led gold standard. The General Agreement for Tariffs and Trade, or GATT, which developed into today’s World Trade Organization or WTO was designed to lower tariffs and allow for more U.S. foreign investments. Finally, the International Monetary Fund or IMF and the World Bank would make loans to former colonial and oppressed nations to enforce free trade and government austerity in the interests of the U.S. and other former colonial powers in western Europe and Japan.

But the decline of U.S. economic hegemony has led to the unraveling of this web of institutions. Bretton Woods was first to go in the 1970s when the U.S. dollar lost its status as being ‘good as gold.’ Since 2005 the World Trade Organization has been deadlocked when developing countries, led by Brazil and China, refused to discuss U.S. demands for more free investments after the U.S. refused to discuss its own trade policies such as subsidies for agriculture. The World Bank is being challenged by a recent Chinese initiative, the Asian Infrastructure Bank, which has started up despite a U.S. effort to prevent other countries from joining.

The U.S.-dominated free-trade system is being challenged on two fronts. In the rest of the world, other economies are growing stronger and demanding more equal treatment from the United States, or absent that, setting up alternative institutions. One of the major economic threats to U.S. domination is China’s Belt and Road initiative that seeks to re-establish China-centered trade and investment links throughout the Eurasian continent.

The other challenge for the U.S. is that free trade policies have facilitated the export of capital, and along with that, jobs, especially in manufacturing. This is spearheaded by U.S. big business as well as European and Japanese corporations. For example, the United States now imports most of its cars (not including pickup trucks and SUVs) as big auto companies export their factories to take advantage of the North American Free Trade Agreement (NAFTA).

The Trump administration is trying to take the widespread discontent with free trade among the working class here, and trying to turn the working class against the rest of the world, painting other countries as the enemy. This is a common theme in the administration’s trade policy, their inhumane treatment of immigrants (such as separating children from their parents), and funding a major military buildup to prepare for more major wars abroad.

The challenge for labor movement and other progressive activists to try to build an alliance between workers and oppressed communities here in the United States with the working people in other countries who also do not benefit from corporate-led globalization.

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