For much of Donald Trump’s presidency, a lot of the smart money has been on it being, despite the histrionics in the West Wing, a more erratic version of the standard pro-business right-wing Republican administration à la Ronald Reagan or George W Bush. Perry Anderson crushingly commented that Trump had formed “a government at variance with most of what he said on the campaign trail, drawing on bankers and businessmen, generals and a couple of politicos of right-wing stamp, to produce a cabinet out of George Grosz”.1 Judged by the administration’s actual output, there was much to support this view—financial deregulation, mammoth tax cuts for the rich, repeal of Obamacare were all measures out of the traditional Republican playbook.
Fire and Fury, Michael Wolff’s hugely enjoyable inspection of the new administration’s hideously distended entrails, presented a White House centred on an solipsistic idiot with the attention span of a goldfish and paralysed by its internal rivalries and divisions. The two main antagonists were presidential strategist Steve Bannon, champion of the alt-right’s economic nationalist agenda, and Gary Cohn, ex-president of Goldman Sachs and director of the National Economic Council, described by Wolff as “a Democrat globalist-cosmopolitan Manhattanite who voted for Hillary Clinton”. Cohn was pushed by Ivanka Trump and her husband Jared Kushner as both a counterweight to Bannon and Wall Street ballast for the administration.2
Now, however, both have gone. Bannon was eased out last year, and then cast into the outer darkness for providing Wolff with his juiciest quotations. Cohn resigned in protest at Trump’s decision on 1 March to impose tariffs on imported steel and aluminium. The two departures are therefore not of symmetrical political significance. Bannon will probably suffer more in personal terms, disowned by his ultra-rich patrons Bob and Rebekah Mercer after Trump’s denunciation for leaking to Wolff and consequently forced out of the Breitbart News website, while Cohn will soon no doubt find a cosy perch back in Wall Street.
Bannon can nevertheless claim victory in defeat. For the tariffs were part of a more general shift on Trump’s part in the direction of the “America First” economic nationalism on which he was elected and away from what Bannon calls “this liberal postwar rules-based order”, which the United States constructed after the Second World War.3 Cohn’s exit was rapidly followed by those of two other key establishment figures, secretary of state Rex Tillerson and national security advisor General H R McMaster. Tillerson, ex-CEO of ExxonMobil, was, alongside Cohn, the key representative of big capital in the administration. McMaster was, together with chief of staff John F Kelly and defense secretary Jim Mattis, one of the generals who flanked Trump and were meant to keep him on the straight and narrow when it came to “national security”—that is, defending the global interests of US imperialism, which are closely bound up with the liberal international order denounced by Bannon.4
Both Tillerson and McMaster didn’t resign. They were fired. And they were replaced by two figures much more to Trump’s way of thinking: Mike Pompeo, elected to the House of Representatives on a Tea Party ticket and appointed director of the CIA by Trump, takes over from Tillerson, while John Bolton, George W Bush’s belligerent ambassador to the United Nations, becomes national security adviser. Both are hawks on Iran and North Korea, potentially the biggest foreign policy crises facing Trump. Bolton is not one of the neoconservatives who want to use American military power to spread liberal capitalism, but he does defend the Bush doctrine, according to which the US has the right to take military action against “rogue states” that threaten its security. Pompeo is what Edward Luce of the Financial Times calls “a Trump enabler”, a right-wing Republican who pivoted from opposing his candidacy to fawning on him. Luce concludes: “with the exception of Jim Mattis…Donald Trump has now cleared the decks of people who stand up to him”.5
These are more than personnel changes, then. They allow Trump to pursue the protectionist economic policies that, for all his incoherences, have been a consistent element in his thinking for many decades.6 The timing may reflect the growing pressure on the administration from special prosecutor Robert Mueller’s investigation into Russian support for Trump’s presidential campaign. But protectionism is as close to a principle as the latter possesses. Moreover, the tariffs are a signal to those whom Bannon calls the “deplorables”, turning Hillary Clinton’s dismissal of Trump’s base into a badge of honour. Wolff underestimated the president’s gut instincts.
According to one report, at an Oval Office meeting soon after Kelly was appointed chief of staff at the end of July last year, Trump raged against the obstructionism of his advisers, telling Kelly: “So, John, I want you to know, this is my view. I want tariffs. And I want someone to bring me some tariffs.” Reportedly, “Gary Cohn…had his shoulders slumped and was clearly appalled by the situation.” The meeting ended with Trump saying: “John, let me tell you why they didn’t bring me any tariffs. I know there are some people in the room right now that are upset. I know there are some globalists in the room right now. And they don’t want them, John, they don’t want the tariffs. But I’m telling you, I want tariffs”.7
And now he’s got them. The 25 percent tariff on steel imports and 10 percent on aluminium were only the beginning. When the European Union threatened retaliation, Trump said he would extend tariffs to European car exports to the US. He followed this up by announcing on 3 April 25 percent tariffs on 1,333 categories of Chinese industrial goods. So he is targeting the two great manufacturing and exporting giants of the contemporary world economy, China and Germany, both of which have run up big balance of payments surpluses, in Trump’s eyes at the expense of the US.8 This is a developing conflict involving the three centres of global capitalism, North America, the eurozone and East Asia.
According to Financial Times columnist Wolfgang Münchau:
Whether trade wars are easy to win, as…Trump asserts, depends a great deal on your opponent. If your target is Germany—a country with a current account surplus of some 8 percent of gross domestic product—then yes, a trade war is easy to win… The eurozone ran a current account surplus of 3.5 percent of GDP in 2017—which is huge given the size of the economy.
The eurozone’s anti-crisis strategy since 2012 has been short-sighted, pushing the current account into a strong surplus and expecting the world to absorb it. It was a beggar-thy-neighbour strategy, more appropriate for small countries than the world’s second-largest economy. The reason why such a strategy is unsustainable is now becoming clear. It makes you vulnerable to protectionist action…
Germany is a large exporter of steel to the US, but steel is only a side show. The real issue is whether Mr Trump is going to follow up on his repeated threats by slapping tariffs on imported cars. The Brussels-based think-tank Bruegel calculated the effects of a hypothetical 35 percent tariff hitting the European car industry—it comes up with a revenue loss estimate of €17 billion a year. The overall economic impact would be higher because of network effects. The EU is not only hooked on exports but also on producing cars to sell to the world.9
The planned tariffs aimed at China affect imports worth $50 billion last year compared to total US-China trade in goods and services estimated at $646.5 billion in 2016, with a mammoth overall US deficit of $385 billion.10 But once again they are targeted to hit the Chinese economy where this is most vulnerable. According to the Financial Times,
Behind the tariffs is what analysts consider to be a broader objective from the White House to disrupt a high-level Chinese strategy, called “Made in China 2025”, that aims to make a number of companies world leaders in sectors such as robotics, semiconductors, aviation and computing.
A crucial element of Beijing’s development plan has been to partner with foreign companies or acquire overseas technologies that will help Chinese groups rise to global dominance in their respective industries. It is these companies the US is expected to take action against… The US Trade Representative office has named “aerospace, information and communication technology and machinery” as industries that would be targeted by tariffs.11
All this is of course anathema to the neoliberal conventional wisdom, for which free trade is the engine of economic growth and the Smoot-Hawley Act 1930, which raised US tariffs from 38 to 45 percent, the main cause of the Great Depression. The latter claim is dubious: the Great Depression, not unlike the Great Recession of 2008-9, originated in a financial bubble that had temporarily offset underlying problems of profitability and whose collapse in 1929 devastated the banking system; the gold standard acted as the main transmitter of slump as governments slashed spending to reverse gold outflows.12
What is true is that Smoot-Hawley was part of the process through which the world economy fragmented into rival trade blocs. The turning point came in 1931-2 when Britain, historically the centre of global trade and finance, first went off the gold standard and then launched Imperial Preference, which was intended to turn the British Empire and its satellites into a protectionist bloc. This forced the US under Franklin Roosevelt to devalue the dollar and accelerated the development of, for example, the French-led “gold bloc” and Germany’s and Japan’s autarkic economic empires.
Antonio Gramsci grasped what was happening at the very beginning of the Depression in 1929:
Every important nation may tend to equip its own political hegemony with an economic substratum. Regional political agreements might become regional economic agreements, in which levels of imports and exports would be “agreed”, no longer between just two states but between a group of states, thereby getting rid of many very evident and by no means small drawbacks… By following this tendency the world market would come to be constituted no longer of a series of national but of international (interstate) markets which would, internally, have organised a certain stability of essential economic activities and which could enter into reciprocal relationships on the basis of the same system.13
The “reciprocal relationships” between these “interstate…markets” proved to be increasingly antagonistic as, against the background of economic stagnation, the dynamic “outsider” imperialisms of Germany and Japan ran up against the limits of peaceful expansion, precipitating the Second World War. The world economy is structurally very different today. Rather than each relying on its own network of colonies and semi-colonies, the biggest economies are closely interwoven with each other—the US and China especially, as is shown by the trade figures above, but Germany trades heavily with and invests in China, while China exports globally, draws raw materials from Africa and Latin America, and is now investing heavily in transport infrastructure across Eurasia under the Belt and Road Initiative (BRI). These connections aren’t an insuperable obstacle to economic competition developing into geopolitical conflict or even war: in the world economy before August 1914, which was also highly integrated, Germany was Britain’s largest export market and a key customer for the City of London.14
The fact that Trump’s tariffs are being imposed under the national security provisions of Section 232 of the Trade Expansion Act 1962 isn’t just a legal manoeuvre to get round the need for congressional approval (which probably wouldn’t have been forthcoming). The administration has designated China a “strategic competitor”. This is a correct judgement. Chinese president Xi Jinping celebrated the removal of term limits that would have prevented him ruling for life by announcing a much more assertive Chinese foreign policy: “We must ride on the mighty east wind of the new era, charge forward with a full tank and steadily steer the wheel with full power, so that the giant ship of China carrying the great dream of more than 1.3 billion Chinese people will continue to cleave through the waves and sail to victory for a promising tomorrow!”15 At the end of March China staged its biggest naval exercise—40 ships including the aircraft carrier Liaoning—in the disputed South China Sea.
But for the moment at least the growing inter-imperialist rivalry between the two “giant ships”, the US and China, is being pursued by economic means. Normally the deficit economy in a trade war has the advantage since it is denying its market to the exports of a surplus economy. But China can seek to limit the impact by linking up with other major trading economies—an alliance with the EU is an obvious ploy. China has already been using the BRI to build up powerful influence in central and eastern Europe, now formalised in the “16 + 1” group. Moreover, as Michael Roberts points out, “what Trump forgets is that now in world capitalism, it is not so much trade, or even services trade rather than goods trade, that matters; it is capital flows. And any full trade war would seriously threaten US foreign investment just at a time when China is expanding its overseas flows”.16 US companies operating in the huge and lucrative Chinese market are particularly vulnerable. China reacted to the steel and aluminium tariffs by announcing retaliatory duties of up to 25 percent on 128 US food products and targeted key US exports such as aircraft, soyabeans, beef and pork in response to the tariffs on industrial goods. Contradicting the reassurances of advisers who said the tariffs are merely proposals that could lead to a negotiated solution, Trump reacted to Beijing’s moves by threatening to slap duties on another $100 billion worth of Chinese exports to the US. A serious trade war between the two biggest economies in the world is now in prospect.
But the main inter-capitalist economic and geopolitical conflicts don’t map perfectly on to each other. Russia, whose self-assertion in what it regards as spheres of influence around its borders and in Syria has infuriated Western national security establishments, is a bit player economically. The increasing tensions between Russia and the West provide both sides with a perfect pretext for blaming their domestic failures on an external enemy; the Salisbury nerve-gas attack offered Theresa May a welcome opportunity to brigade together the major Western powers in retaliatory measures against Russia at a time when Britain faces not so splendid isolation as a result of Brexit.
The more dangerous potential conflicts pit the US against second or third rank powers, namely Iran and North Korea. The multi-level chess game being waged primarily by regional actors in the Middle East is so unfathomable as to make it very unlikely the US would start another war there (though it’s conceivable that Trump might cast a blind eye at an attack by Israel and Saudi Arabia on Iran, which has greatly extended its influence thanks to the catastrophes in Iraq and Syria).
Trump has tried to break out of the confrontation with North Korea over its nuclear missile programme by agreeing to a summit with Kim Jong-un. As usual, Pyongyang has played its hand much more cleverly than Washington—using the Winter Olympic Games to cultivate South Korea, and playing on Trump’s vanity to get agreement to a summit without the normal US precondition that North Korea undertake to drop its nuclear programme. Kim followed this up by mounting an armoured train to Beijing in late March for a personal meeting with Xi.
It is in the role of China, North Korea’s increasingly unwilling patron, where the broader economic and geopolitical tensions fuse. Trump has pushed Beijing to impose economic sanctions on North Korea, with some degree of success—apparently China virtually cut off exports of petroleum products, coal, steel and cars to North Korea in late 2017 and early 2018.17 Now Kim is pushing back. As Evan Osnos puts it, “his China play has made it more difficult for Trump, who would have preferred that Beijing remain at odds with Pyongyang. Kim and Xi have re-scrambled the perceived loyalties and suspicions that will shape any potential encounter between North Korea and the United States—at the negotiating table or on the battlefield”.18
More or less coherent in economic policy (or becoming so), Trump is much more erratic in foreign affairs. Thus he congratulated Vladimir Putin for his highly dodgy re-election, and then expelled a record 60 Russian diplomats as part of the concerted Western response to Salisbury, following this up with sanctions freezing the assets of leading Russian oligarchs. Trump’s independence of the US national security establishment no doubt helps to explain his granting of a North Korean summit without preconditions. But it might also lead him to react to an unsuccessful summit by adopting a course leading to a disastrous war. Richard Haass, a pillar of this establishment, lamented on Twitter: “@realDonaldTrump is now set for war on 3 fronts: political vs Bob Mueller, economic vs China/others on trade, and actual vs. Iran and/or North Korea. This is the most perilous moment in modern American history—and it has been largely brought about by ourselves, not by events”.19
In fact, the growing conflicts among the leading capitalist states are a product of the relative decline of US capitalism and the debilitating effects of what Roberts calls the Long Depression, which started with the financial crash a decade ago and continue today, as Joseph Choonara shows elsewhere in this issue. But the economic and financial crisis and its aftermath have morphed into what Leo Panitch calls a crisis of political legitimacy of neoliberal capitalism.20 Trump is the personification of this legitimacy crisis. What we are now seeing is this crisis, through his agency, reacting back onto the relations among the major capitalist economies, and thereby adding to the considerable instability that already exists. So the problem isn’t “events”. The neoliberal version of capitalism remains strongly entrenched economically and politically. But it is turning in on itself, with increasingly damaging and dangerous consequences.
Alex Callinicos is Professor of European Studies at King’s College London and editor of International Socialism.
1 Anderson, 2017, p58. For an alternative assessment that explores the complexities of Trump’s relationship with both state and capital, see Callinicos, 2017a. Thanks to Camilla Royle and Joseph Choonara for their comments on this article in draft.
2 Wolff, 2018, Kindle location 2483. Chapter 10, on the Kushners’ promotion of Cohn, is the funniest part of a hilariously scary book.
3 See Gamm, 2018. In the same interview, however, Bannon warns that the tariffs, combined with the higher government deficit that the $1.3 trillion budget signed off by Trump in late March would produce, could make the US vulnerable to retaliation by Beijing, which could use its holdings of US Treasury bonds to help precipitate a financial crisis. In fact, China has to accumulate dollar assets in order to keep its currency competitively low—an illustration of the fact that the Chinese surplus and the US deficit reflect structural factors that won’t be solved by a trade war—see Harrison, 2018.
4 See Gowan, 1999, Callinicos, 2009, chapters 4 and 5, and Panitch and Gindin, 2012.
5 Luce, 2018. On Pompeo’s shifting relationship with Trump, see Phillips, 2018.
6 Laderman and Simms, 2017.
7 Swan, 2017.
8 For a critique of China’s and Germany’s high export orientations, see Pettis, 2013.
9 Münchau, 2018.
11 Weinland and Bland, 2018.
12 For a brief historical comparison, see Bown and Irwin, 2008; see also Callinicos, 2010, chapter 1, and Eichengreen, 1992.
13 Gramsci, 1995, pp232, 233; Gramsci, 1975, II, p267.
14 Kennedy, 1980, chapter 15.
15 Financial Times, 2018.
16 Roberts, 2018. See also the useful discussions (from the perspective of mainstream economics) in Sandbu, 2018, and Wildau, 2018.
17 Kynge, 2018.
18 Osnos, 2018. See Callinicos, 2017b, on the background to the North Korean crisis.
20 Leo Panitch, “Trumping the American Empire”, Seminar in Contemporary Marxist Theory, King’s College London, 8 November 2017.