Who will be the casualties of a trade war?

September 5, 2018

With Donald Trump threatening an all-out trade war with China, Dorian B. looks at how the conflict is unfolding — and what questions the left needs to take up.

A FULL-BLOWN trade war between the U.S. and China looks more and more possible with each passing week, thanks to Donald Trump and his economic nationalist agenda.

The two nations have already imposed $100 billion worth of new tariffs — which are effectively a tax on imports, in this case from a specific country. The Trump White House is poised to escalate the conflict with a further round of 25 percent duties on $200 billion worth of Chinese products as early as this Friday — though the administration may not follow through right away.

The consequences of a serious trade war would be enormous. So why is this happening, where will it lead, and how will it impact our lives?

The first thing to say is that despite Trump’s claims that tariffs and trade restrictions will help the U.S. economy, large numbers of people, including workers, farmers and the poor across the U.S., stand to suffer if Trump gets his way.

Donald Trump speaks to the press during a visit to China
Donald Trump speaks to the press during a visit to China

For one thing, the escalating conflict with China will further infect our workplaces, campuses and communities with the poison of nationalism, in the form of an “us versus the Chinese” mentality. We know from history that this will stoke violence and prejudice, while shifting the blame for the U.S. ruling class’s continuing attacks on our education, health care, wages and more.

And far from providing economic relief to U.S. workers, a trade war is likely to raise prices on thousands of consumer goods, contribute to downward pressure on wages, and undermine job security, particularly in certain sectors.

Donald “Tariffs are the greatest!” Trump has been talking about launching a trade war against China for years. “Motherf*****s, we’re going to tax you at 25 percent,” he ranted as far back as 2011. Trump’s vile comments about how China is “raping our country” were a centerpiece of his presidential campaign.

Trump has claimed different goals in this trade war: to reduce the U.S. trade deficit; to end the transfer of U.S. technologies to Chinese corporations; to stop “unfair” state subsidies to Chinese companies; and to combat the Chinese government’s Made in China 2025 initiative, which aims to make the country a leader in high-tech manufacturing, rivaling Western competitors.

After the long era of neoliberal globalization, the U.S. and Chinese economies are interconnected in many ways, and it’s hard to tell how far the Trump administration would go with this conflict. But some analysts make the case that Trump and his economic team want to significantly wind back those connections.

WHATEVER THE exact aims — and different players in the Trump administration have different views on this — Trump is pressing the line that China is exploiting the U.S. and pushing its economy into a state of decline.

Trump’s worldview of the U.S. as a persecuted victim is utterly false. The U.S., along with other Western countries, has had a dominant position in relation to China — including the exploitation and harsh oppression of Chinese workers within the U.S. — dating back to the 19th century.

In the more recent period, as China became an industrial power, with the state directing investment and resources to build its economy into an exporter to the world, Corporate America benefited massively from being able to take advantage of low-wage, unprotected Chinese labor. The crisis of worker suicides in China today is one consequence.

The so-called “free trade” regime of the last 40 years has also clearly hurt the U.S. working class. But the reasons for this are often oversimplified.

The decline in U.S. manufacturing employment — which has fallen by 5 million jobs since 2000, a drop of more than 20 percent, even while output continued to grow — is commonly attributed to trade and globalization.

Actually, the full picture is more complicated. Some corporations have certainly moved manufacturing operations out of the U.S. or shifted their purchasing to foreign-made manufacturers to take advantage of low-wage havens in China, Mexico and elsewhere.

But much of the decline in U.S. manufacturing jobs is the result of rising productivity and automation, the shocks of repeated economic recessions and crises, and still other factors. (See different perspectives on the causes of the decline, which is still hotly debated here, here and here).

On the whole, though, the “neoliberal” era of global, deregulated hyper-competition has driven down working-class living standards in the U.S. — as it has around the world — whether through direct attacks on wages, working conditions and benefits, or indirectly through the austerity offensive against the social safety net.

BUT TRUMP’S trade wars and protectionist policies aren’t a solution to these problems. This is a crucial point for socialists to make, because many on the left and in the working class movement are drawn to economic nationalist ideas and policies, if in a different form from Trump.

Although they are staunch opponents of Trump’s politics and racism, important left-wing figures have gotten behind a more protectionist direction for U.S. trade. During his 2016 campaign, democratic socialist standard-bearer Bernie Sanders promised to increase tariffs on Chinese and Japanese steel. Since then, he has argued for penalties on the Chinese state for exploitative trade and labor practices.

Longtime activist and former independent presidential candidate Ralph Nader has insisted that Trump is “with the progressives on challenging the rigged trade agreements.” He went so far as to claim, during a June episode of The Ralph Nader Hour, that this trade fight “is an issue of supreme patriotism.”

Nader’s guest on the show, Lori Wallach, the founder and director of Global Trade Watch, praised Trump’s U.S. Trade Representative Robert Lighthizer as a “stand-up guy and a straight shooter” who “finds the abrogation of our sovereignty so deeply troubling.”

Wallach, who has been an advocate for global labor and consumer rights for decades, has reportedly met with Lighthizer in the hopes of influencing trade negotiations in a progressive direction, according to the Daily Beast.

To be clear, few people on the left have endorsed Trump’s specific program on trade, and they are sharply critical of his xenophobia. But with Trump ramping up this trade battle, there will be both economic and political effects that the left must discuss and understand in order to put forward an internationalist view.

THE TRADE battles between the U.S. and China are one part of a wider conflict that the Trump administration is instigating with virtually all of the U.S.’s major trading partners, including the renegotiation of the North American Free Trade Agreement, trade talks with the European Union, and ongoing disputes with Japan and South Korea.

But the confrontation with the Chinese government of Xi Jinping is the one that seems to loom largest.

The U.S. trades more with China each year than with any other country or regional bloc aside from North America and the European Union. In 2016, the U.S. and China exchanged $578 billion in goods, on top of $70 billion in services and over a $100 billion in foreign direct investment, tying the two countries closely together.

A 25 percent tariff in addition to other trade measures cannot be imposed on this enormous volume of commerce without causing serious disruption.

That said, it’s true that many proponents of current trade relationships under neoliberalism exaggerate the economic impact of a trade war.

The International Monetary Fund’s estimate of losses to global GDP if all of Trump’s trade threats — not just those against China — go into effect is around $430 billion by 2020. That’s a large sum, but it would not tip the global economy into crisis territory by itself.

Likewise, China’s growth isn’t projected to falter that much as a direct result of Trump’s tariffs — although it may for other reasons, like the country’s enormous debt burden.

But the impact on workers will be disproportionately greater due to the direct threat of layoffs or traumatic shifts in production, the heightened pressure on firms to reduce costs and the inevitable increase in prices on imported goods.

In China, many factory owners and managers are already considering moving production to South and Southeast Asia after long, bitter struggles by workers and tightness in the Chinese labor market have pushed wages higher.

The Financial Times reports that the new tariff walls are compelling firms and managers in the industrial Guangdong province to shift production. Taiwanese-owned corporations Delta Electronics Inc. and Merry Electronics, whose workers produce components for Apple and Bose, have announced that they are weighing moving operations to Thailand.

Needless to say, the effects on Chinese workers and their families in these areas would be devastating.

IN THE U.S., Trump has forged an alliance with capitalists in the steel industry, who see an opportunity to use his protectionist measures to boost sales.

The CEOs of American steel companies AK Steel, Nucor and U.S. Steel, as well as the boss of the world’s largest multinational steel producer, ArcelorMittal, have all backed Trump’s tariffs. Trump’s claim to supporters that U.S. Steel is opening six new mills was incorrect, but the company is reopening two shuttered facilities, and the larger Nucor is building new mills in Missouri and Florida.

The prospect of more jobs in steel has led some associated with the labor movement to support Trump’s trade measures, but the battle doesn’t end with more jobs — organized labor will need to challenge the bosses to unionize new facilities and protect workers’ rights in older ones.

The ongoing lockout of 56 members of the United Steelworkers (USW) at Bull Moose Tube in Georgia shows the other side of the picture in an industry that Trump claims to be saving. And the USW bargaining team at U.S. Steel is asking members to vote to authorize a strike after three months of negotiations failed to produce a contract.

As for the rest of the U.S. economy, it’s clear that the benefits for steel — and most of all for the steel bosses — is the exception to the rule.

The vast majority of U.S. business opposes Trump’s tariffs on China, from auto and aerospace to industrial chemicals and machinery, and many sectors in between — for the simple reason that tariffs will hurt their profits.

Let’s look at how tariffs would effect, for example, the auto industry, which employs more than 7 million people in assembly plants, parts suppliers, auto dealerships and more. China is the second-largest importer of U.S.-made passenger vehicles and light trucks, according to the Office of Transportation and Machinery. That means retaliatory Chinese tariffs imposed on autos imported from the U.S. could have a serious impact.

The biggest auto-exporting facility in the U.S. is the BMW plant in Spartanburg, South Carolina, which produced 272,346 vehicles worth $8.76 billion for export in 2017, with China as their top market destination. Trump’s trade war puts a big question mark on the horizon for workers at this plant.

Workers in states like California, Washington, Louisiana, Alabama, and Alaska all produce heavily for the Chinese market, and then there are the millions more workers employed by companies that import intermediate parts, supplies and merchandise from China into their factories and stores. All are vulnerable to the effects of an escalating trade war.

The impact extends to the U.S.’s 300,000 soybean farmers, whose farmlands stretch across nearly 90 million acres mainly in the Midwest, generating $41 billion in revenue in 2017.

China is by far the largest export market for soybeans, so the tariffs will have an outsized impact on this industry. Soybean prices have fallen by 20 percent since Trump’s trade threats began.

BEYOND THE economic effects, there is the dangerous political ramification of an intensified nationalist agenda that pits U.S. and Chinese workers against one another.

The widespread idea, promoted by Trump, that foreign workers are responsible for the suffering of people here in the U.S. is a false and toxic myth that we have a duty to debunk at every opportunity.

To recognize just how dangerous and toxic, go back to the trade conflicts under Ronald Reagan, when Trump’s Trade Representative Bob Lighthizer got his start. As Joe Allen wrote in SocialistWorker.org, the racism whipped up by the nationalistic “Buy American” campaign pushed by the United Auto Workers cost 27-year-old Vincent Chin his life in 1982. He was murdered by a Chrysler superintendent who blamed Vincent’s “kind” for job losses in the auto industry.

Perhaps the most important and overlooked consequence of any potential trade war, however, is the intensification of the growing political and military rivalry between the U.S. and China.

During a rally in West Virginia in August, Trump told his right-wing audience: “When I came we were heading in a certain direction that was going to allow China to be bigger than us in a very short period of time. That’s not going to happen anymore.”

Actually, both the Obama and Bush administrations had been working on containing China’s rise long before Trump came around. And on this score, there’s a high level of unity among U.S. elites. Most of big business may oppose Trump’s tariffs, but they’re with him on the need to stop China from challenging U.S. industrial and especially military might.

In 2010, after a decade of unprecedented industrial expansion, China overtook the U.S. as the world’s largest manufacturer by the measure of value added. But the U.S. remains the richest country in the global system, the dominant military power and a clear leader in high-tech production within crucial sectors like aerospace, information technology and complex industrial machinery.

The U.S. ruling class is determined to preserve these positions, while China’s elite hopes to one day subvert them.

That’s why one of the Trump administration’s central demands in this trade conflict is that the Chinese government stop facilitating the transfer of technology from U.S. corporations to domestic producers.

Despite the disagreements over tariffs, there is a general consensus among the U.S. political and military establishment on the need for a more aggressive posture against the long-term threat to U.S. dominance over high-tech manufacturing, especially the military sector.

By drawing attention to this dynamic, we can strengthen our opposition to the nationalist and imperialist interests that ultimately lie behind every U.S. measure stoking conflict with an up-and-coming rival.

Our world is already far too violent and divided. An inflamed imperial rivalry between its greatest industrial powers would only add to the misery and suffering around the world.

We need to use every chance to build unity among workers and the poor across all borders, with the goal of building up the forces that will stand against the clash of competing capitalist states, both today and in the years to come.

SO WHAT will happen next, and what can we do about it? “Even shooting wars end with negotiations,” billionaire Commerce Secretary Wilbur Ross told CNBC several weeks ago. That’s not exactly reassuring.

The next $200 billion in tariffs on Chinese goods is scheduled to go into effect as early as this Friday. Under the pressure of corporate lobbyists clamoring for a negotiated solution, Trump could back down. But with his right-wing supporters galvanized around this cause, it is also possible that the logic of escalation will take hold, leading to a prolonged conflict.

We should oppose the intensification of economic and national rivalries between the U.S. and China. Workers everywhere have an interest in stopping a war of any kind between these two powers.

This doesn’t mean supporting the status quo. Left figures like Bernie Sanders and Lori Wallach are absolutely right to agitate against the “free market” system and its multilateral trade and economic agreements that made it easier for corporations, especially in the U.S., to lay waste to labor rights, environmental protections and more around the globe.

But we should also challenge the ideas of economic nationalism, especially when political leaders are trying to appeal to working-class people on this basis. Any concession to the view that “American” jobs can be “protected” from “foreign workers” only weakens the working class movement.

The solutions to the crisis of declining working class living and working standards in this country and across the globe won’t be found in the realm of trade policy. Our focus has to be on building up the power of the rank and file as the real source of labor’s strength.

We can only start to move toward a more just and sustainable international order if workers build up the power to strike together and organize solidarity across national borders. Without that internationalist base of working-class strength, we will be weaker in advancing the cause of labor in the here and now — and in fighting for a socialist future.

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