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What is Trump planning to do to us in these turbulent times?

Lava

—17 januari 2025

What will Trump’s economic policies mean for the global economy, for the European Union and for the Global South? How will they affect the relationship between labor and capital within the United States? We asked Grace Blakeley, Sam Gindin, Rémy Herrera, Jörg Kronauer, Peter Mertens, Michael Roberts and Ingar Solty.

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Grace Blakeley, British economist, author of Vulture Capitalism (2024), journalist at Tribune, and host of the podcast A World to Win. (Answers)

Ingar Solty, German political scientist, author of Trump’s Triumph? Divided States of America, More Nationalism, New and Further Trade Wars, Aggressive Geopolitics (2025) and Post-Liberal Capitalism (forthcoming), advisor at the Rosa-Luxemburg-Stiftung. (Answers)

Jörg Kronauer, German sociologist, author of The Deployment: Prehistory to War. Russia, China, and the West (2022), and journalist at Junge Welt. (Answers)

Michael Roberts, British economist, co-author of A World in Crisis (2018), and blogger at The Next Recession. (Answers)

Peter Mertens, Belgian sociologist, author of Mutiny: How Our World is Shifting (EPO, 2023), and General Secretary of the Workers’ Party of Belgium (PTB/PVDA). (Answers)

Rémy Herrera, French economist and co-author of Dynamics of China’s Economy (2023). (Answers)

Sam Gindin, Canadian economist and co-author of The Making of Global Capitalism: The Political Economy of American Empire (Verso, 2012). (Answers)

Grace Blakeley

What will be the impact of Trump economics on the world economy? And more specifically what will be the impact for Europe and/or for the Global South?

Grace Blakeley The US state is, of course, the guardian of global capitalism. This role doesn’t just require sponsoring interventions against regimes that threaten the stability of the capitalist world system, it also means buttressing the international institutions and norms that form the architecture of the global economy – as well as protecting and promoting the dollar as the world’s reserve currency.

Under Trump, the role of the US military is unlikely to change – though its focus may shift even further towards attempting to resist the rise of China. But the US’ role as guardian of the architecture of the global economy may come under threat.

The US is able to run dual current account deficits as well as fiscal deficits because everyone wants to hold dollars. Why does everyone want to hold dollars? Because they’re the global reserve currency. But, for the dollar to play the role of the world’s reserve currency, there has to be a surplus of dollars in the world economy, which means the US has to run a current account deficit. So, if Trump wants to reduce the US’ current account deficit, he’ll have to accept that he will also be undermining the dollar’s role as the global reserve currency.

That’s why so many people found Trump’s comments on his social media site Truth Social so bizarre. He wrote: “The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER. We require a commitment from these countries that they will neither create a new Brics currency nor back any other currency to replace the mighty US dollar or they will face 100% tariffs and should expect to say goodbye to selling into the wonderful US economy.”

What’s funny about this statement is that imposing tariffs on these countries would make it easier, and more necessary, for them to shift away from the dollar. If you want the dollar as the world’s reserve currency, you have to maintain a current account deficit.

To be clear, neither of these aspects of US hegemony is likely to change under Trump. No matter how hard he tries, Trump isn’t going to eliminate the trade deficit without decimating US citizens’ demand for imports – which would entail a huge amount of economic pain. And even if he did manage to substantially reduce the deficit, a transition away from the dollar as the world’s reserve currency would require another currency to step in – and it’s not obvious which currency that would be at this point in time.

China’s currency isn’t internationalised, so it can’t be expected to play this role. And this is unlikely to change as long as the CCP wants to retain control over monetary policy. The EU, meanwhile, is the sick man of the world economy. Several of its major economies are in or on the verge of recession, while also facing severe political crises. The conflict with Russia and resulting energy crisis continues to create a severe strain. And the momentum behind far-right movements seeking to break up the block only appears to be accelerating. Trump may make this economic pain worse with his tariffs, but the EU is already facing plenty of problems of its own making.

The US’ role as guardian of the architecture of global capitalism may come under threat.

But, while the dollar will remain central to the world economy, central banks have been moving away from the USD towards holding a more diverse basket of currencies for many years now. And countries that have been most impacted by US sanctions, which now affect one third of the entire world1, are attempting to build a parallel financial infrastructure to allow them to trade and invest outside of the US’ orbit. This shift away from a unipolar world order is only likely to accelerate under Trump.

This shift does create an opportunity for states in the global South. Historically, the periods of greatest freedom for poor countries were periods in which they were able to play superpowers off against one another (though this never stopped the US intervening in nations considered to be in its ‘backyard’, as Vincent Bevins documents masterfully in The Jakarta Method). If, for example, poor countries can find new sources of borrowing that allow them to reduce their dependence on private creditors located in rich countries and international financial institutions controlled by those rich countries, they may gain more leeway to invest in development.

However, the big challenge here is monetary policy. For as long as the Fed insists on maintaining relatively high interest rates, poor countries are going to be pushed further into debt distress, while middle income countries are going to struggle to raise the cash needed to invest in industrialization or decarbonization. So far, China hasn’t been much more generous when it comes to interest rates on foreign loans – though its loans do come with far fewer terms and conditions than those from the West.  

Unless the global South learns to cooperate among itself, as Third Worldists like Nkrumah and Sukarno hoped it would, the slow erosion of American hegemony won’t lead to the emergence of a fairer world system.

What will be the impact of Trump economics on the domestic economy, for capital and for the working class?

Grace Blakeley Trumpian economics is based on the worship of financial markets. For as long as corporate profits are booming and share prices are rising, Trump can present his economic agenda as a success.

His previous round of tax cuts set off a stock market bonanza. Corporations used the tax cuts to buy back billions of dollars’ worth of their own shares and to distribute vast sums in dividends. One estimate suggests that the tax cuts benefitted the top 5% three times more2 than they benefitted the bottom 60%. And the promised trickle-down effects did not materialise; workers earning under $114,000 saw no change in their income as a result of the tax cuts.

Trump has reassured markets that they can expect the same treatment this time around. And they seem to believe him, which is why we’ve seen such astonishing gains across financial markets since he was elected. Trump’s cheerleaders are already citing this stock market bonanza as evidence of the effectiveness of their proposed policies.

In fact, share prices are rising because investors are expecting an increase in corporate profits under Trump. These profits are highly unlikely to be invested in creating new jobs in the US, and instead will likely be used for share buybacks and dividends payments, as they were last time.

Trump’s success among the working classes is, in part, based on the idea that rising share prices will benefit everyone. If you’re smart enough to jump on the bandwagon at the right time, so Trump fans say, anyone can get rich from investing in stock markets. This idea also explains his immense appeal among cryptocurrency enthusiasts. The ideology of Trumpism is highly individualistic – it’s based on a sort of crude, financialised version of the American dream.

But this argument is belied by the real state of the American economy, in which wealth is highly skewed towards those at the top. Income from work represents 96% of the income of the bottom 90% of American households3, next to just 40% for the top 1%. In other words, 60% of the earnings of the top 1% come from wealth. Booming stock markets benefit the wealthy, not workers.

When it comes to wage growth, the Biden administration’s economic policies did deliver some marginal gains for workers. After decades of real terms stagnation – the average American earned the same in purchasing power terms in 2019 as they did in 19794– wages started to pick up again after the pandemic. But this wage growth was relatively modest and did not offset the increase in insecurity and uncertainty triggered by the inflation seen over the last several years, which is why Biden lost.

Trumps previous round of tax cuts set off a stock market bonanza. He has reassured financial markets that they can expect the same treatment this time around.

Trump is likely to destroy the Biden-era policies that did help to boost wages. He has already set his sights on the National Labor Relations Board, which was beginning to slow the dramatic fall in workers’ bargaining power that has been taking place since the 1980s. There will be little in the way of productive public investment, nor anything like the stimulus package provided by Biden in the midst of the pandemic. Another crisis like the pandemic is, of course, unlikely. But the depth of the climate crisis will bring plenty more small to medium scale disasters to the US economy over the next several years – and Trump will likely leave those impacted to fend for themselves.

Trump’s tariff policies may bring some production back to the US, but this is unlikely to create many good jobs as reshoring industries tend to offset higher labour costs with automation. And any potential increase in wages will likely be offset by the increase in prices that will result from high tariffs on imports. All in all, the rich are set to benefit far more from Trump’s economic policies than workers.

Trump’s rhetorical strategy , as always, will be to claim that the reaction of financial markets shows that he’s doing a good job on the economy. He might get away with it, because perceptions of the economy are highly skewed based on partisan lines5. But this is because ‘the economy’ is such an abstract category that it has become essentially meaningless when it comes to talking about people’s living standards. When it comes to actual living standards, the working class voters who opted for Trump are likely to see their hopes for a better future dashed once again.

Ingar Solty

What will be the impact of Trump economics on the world economy? What will be more specifically the impact for Europe and/or for the Global South?

Ingar Solty Western leaders, including those who have accused Trump of being a fascist, are in many respects Trumpists themselves. Trump is not the root cause but rather a symptom of deeper tendencies of the pervasive crisis of Western capitalism and imperialism which began in 2007. At the end of the day, Trump is an American president inheriting and facing the dilemmas of the American Empire – and of those there are plenty.

The United States is in a high-tech rivalry with China. This is the world-historical conflict of the 21st century; and the United States appears to be losing it. China’s exit strategy from the crisis, which involved massive state interventionism to create national champions in future technologies in general and green technologies in particular, was superior to the Western strategy of “internal devaluation” of costs and labor, also known as the politics of austerity. As a result, China has emerged as an equal in many future technologies from the 5th and 6th generation of mobile communications to AI and Big Data, including all the various profitable derivations such as the “smart city”, “autonomous driving”, face and speech recognition technologies. Furthermore, today China’s irreversible e-revolution has turned it into the world leader in green technologies from wind turbines and solar panels to electric cars and high-speed rail.

China’s exit strategy from the crisis was superior to the Western strategy of ‘internal devaluation’ of costs and labor, also known as the politics of austerity.

After the fall of the Soviet Union, the U.S. declared that it would not tolerate a rival to its supremacy. However, from Bush’s attempt of controlling Middle Eastern oil resources against all potential rivals, including the EU, to cutting off Chinese trade through Obama’s “pivot to Asia” and military “forward positioning,” all U.S. strategies of containing China so far have failed. Consequently, the U.S. state is stepping up its game, wielding all the power resources it has left. Those are still quite many, but they become increasingly and openly coercive.

On the one hand, this shows in America’s economic warfare which involves (1) the politicization of supply chains to the extent that the U.S. state sanctions foreign private corporations for their trade with China or even employment of Chinese nationals, (2) the utilization of the U.S. domestic market as blackmailing leverage against China but also Europe, and (3) massively coercive interventions into the “free market” such as driving ByteDance’s TikTok out of the American market on behalf of Silicon Valley monopoly capital through an enforced sale or outright prohibition.

On the other hand, it shows in U.S. state’s geopolitics of encircling China through the militarization of the Western Pacific and an aggressive reversal of the One-China diplomatic status quo by pushing for policies that support Taiwanese independence, which China would never accept. In a world whose economic center shifts eastward and southward, in which China is now the largest trading partner to more than 120 countries in the world, and in which BRICS are increasingly attractive, this policy seeks to force the globe into a new bloc confrontation and coerce major countries like India or South Korea into surrendering their foreign policy of multi-alignment with both the U.S. and China.

The U.S. state is stepping up its game, wielding all the power resources it has left. Those are still quite many, but they become increasingly and openly coercive.

However, the new Cold War differs from the old Cold War insofar as it reverses its parameters. In the old one, the US was economically superior to the Soviet Union and hegemonic both internally and externally, creating the empire of “the West.” In the new one, the US economy is losing its position of dominance and living standards of the popular classes in the West are deteriorating. As a result, Western imperialism has increasingly forfeited its hegemony both internally and externally. Internally, a pervasive populist situation, which propels anti-establishment political forces (especially from the Right) and clientelistic party politics, is making the state largely dysfunctional. Exit-strategies from capitalist crises necessitate a unified bourgeoisie with immense statecraft but the paradox of such crises is that they tend to fragment the bourgeoisie across numerous clientelistic and self-serving parties incapable of the large-scale planning necessary to confront China and its tremendous statecraft.

Trump’s declared decision to rule in an authoritarian fashion, including shifting legislative bodies under the control of the executive, large scale purges against “internal enemies” in the state apparatus, rule through executive orders and, potentially, a permanent state of exception voluntarily induced through the inevitably violent conflicts over mass deportations, need to be seen in this light. They take place in an environment of both elite and mass disillusionment with the functionality of liberal parliamentarianism, albeit for opposite reasons.

Trump, who is openly dreaming of a “unified Reich”, will utilize his new power in a new attempt to rein in China. His position is strengthened by the fact that the Biden administration continued and even intensified the economic warfare against China, increasing the punitive tariffs against Chinese e-vehicles and solar panels from 25 to 100 percent. On top of that, the incoming administration is planning a 20 percent base tariff for all imports to the United States and a 60 percent base tariff for all imports from China.

The new Cold War differs from the old Cold War insofar as it reverses its parameters.

Two factions, are battling over whether protectionism is merely, as it was under Reagan and the first Trump administration, a means to an end, functioning as the leverage of enforcing better trading conditions and exacting intellectual property right tributes from the rest of the world or whether it is an end in itself. This battle is fought between the wing led by Scott Bessent, Trump’s designated Secretary of the Treasury, and the wing led by Secretary of Trade Howard Lutnick, which has the support of shadow president Elon Musk. The outcome is an open question. It also depends on whether the Trump administration is going to maintain the Inflation Reduction Act and the CHIPS and Science Act as the main pillars of “crowding in” capital investment from the rest of the world.

What will be the impact of Trump economics on the domestic economy, for capital and for the working class?

Ingar Solty When Trump became president of the United States for the first time, he implemented a radicalized program of old school neoliberal policies. He cut the marginal income tax rate from 39.6 to 37.0 percent and slashed the corporate tax rate from 37 percent to 21 percent. He justified those policies in the name of the working class. In the stale rhetoric of “trickle down economics”, he argued that the tax cuts for corporations and the super-rich of today would be the investments of tomorrow and the jobs of the day after tomorrow. The tax cuts would therefore refinance themselves through massive growth rates. And growth would ensure that the working class real wages would rise to levels not seen in decades.

“Make America Great Again” is the yearning for a 1950s “Paradise Lost” when men without higher education degrees could still support a family based on a single income, build a house, buy two cars and send their kids to college, while their women’s financial dependence would ensure “family values”, i.e. that women could not get a divorce from beating husbands, even if they wanted to. Obviously lost from this memory was and is that this “Golden Age of Capitalism” (Eric Hobsbawm) presupposed powerful labor unions, high taxes on capital and the rich, a robust public sector with strong regulations, and monetary policy oriented towards full employment policies, i.e. the exact opposite of what Trump enacted and is suggesting today.

The 2024 presidential election’s exit polls clearly show that Trump has no mandate for either his plans of mass deportation, a ban on abortion or massive bottom-up redistribution.

Consequently, Trump never delivered on his promises. All he did was enrich the billionaire class even more while nearly doubling the new public debt. It is no wonder that back in 2017 Trump not only fell under the critical margin of 40 percent favorability ratings in record-speed but that he also left office as a historically unpopular president.

Today tragic history repeats itself as farce. Bidenomics failed not only due to the internal “resistance” of Senator Joe Manchin, but also because, unlike FDR’s New Deal, the Biden administration refrained from mopping up billionaire wealth in order to finance it but instead decided to rely on historically low interest rates. When inflation hit for a number of reasons, Bidenomics was doomed. Inflation and the political centrism of the Democratic party establishment have now delivered power to Trump even though he is still widely unpopular and considered to be “too extreme” by the majority of the population, including the majority of those who actively voted in the presidential elections. Also, the voting behavior of the multi-racial working class, at least of the segment which still votes, shows that class trumps liberal identity politics.

And yet, the question is whether there actually exists a Trump project which is capable of mobilizing and maintaining the active consent of a majority of Americans including the white, Latino and Asian-American workers who voted for Trump. It is doubtful whether there is such a thing as a Trump project with such hegemonic capacities. This is particularly the case since the 2024 presidential election’s exit polls clearly show that Trump has no mandate for either his plans of mass deportation, a ban on abortion or massive bottom-up redistribution.

The U.S. is a country with a tremendously vulnerable working class. The percentage of those who live “from paycheck to paycheck” has risen to 60 percent, up from around 40 percent prior to the global financial crisis. In other words, three out of five Americans have no savings whatsoever to respond to the enormous insecurities and risks of life in capitalism: inflation, job-loss, involuntary short-term employment, physical or psychological incapacity for work, sickness and health-care costs – the leading cause of private household bankruptcy –, care-work for dependent elders, the birth or college education of children, etc.

All this needs to be seen in light of the private for-profit model which individualizes most of these risks while there is only a severely limited safety net to offset the impact capitalist crises have on the individual. All this is the material foundation of a “populist situation” in a country in which, according to frequent Gallup polls, the last time a majority of the population saw the country “on the right track” dates back to May 2003!

The punitive tariffs against China and the rest of the world will significantly increase the costs of living and risk pushing a highly vulnerable working class over the cliff.

The irony of history appears to be that Trump got elected because of the pervasive anger over inflation but will soon reign over a country of even more rampant inflation once his policies are enacted. When in 1979, the Volcker shock, which increased the Fed’s interest rates in order to fight inflation, it finalized the neoliberal turn. It essentially wiped out two of the three pillars of anti-capitalism at the time: the resulting mass unemployment broke (1) the back of trade-union power in the West, as can be seen in the fact that the massive strike waves of the 1970s subsided long before Reagan fired the air-traffic controllers or Thatcher clobbered striking miners. Meanwhile, the multiplication of dollar-denominated debt in the “Third World” broke (2) the back of largely socialist-oriented national liberation movements thus allowing for enforced “globalization” through the free trade imperialism of World Bank and IMF structural adjustment, which has brought about capital mobility, i.e. the structural power enabling capital to henceforth blackmail the working classes of the world into concession bargaining and the world’s states into subsidies and tax cuts.

Trump will become a highly unpopular president again rapidly. This, however, might also propel both authoritarianism within as well as jingoism abroad.

Yet while breaking these two pillars in turn facilitated wiping out the third pillar, the Soviet Union and real socialism, it has created new contradictions. One of them is that the working classes of the west have become increasingly dependent on cheap consumer goods imported from the global South and namely from China. In many respects, the weakening of trade-union power in the West and especially in the US was offset through the globalization of capitalism.

As a result, however, the punitive tariffs against China and the rest of the world will significantly increase the costs of living and risk pushing a highly vulnerable working class over the cliff. Various studies expect inflation to increase to new heights ranging from 6,3 percent to 8,9 percent. Now, there exist some “counteracting tendencies” (Karl Marx) to relative impoverishment. These include the successes of minimum wage initiatives at the state level, recent unionization wins as well as some of the existent Trump policies themselves, such as the clever plan of a tuition-free “American Academy” financed through taxes on liberal Ivy League universities’ endowments or the culture war subsidies for natalism and home-schooling. Nonetheless, it is unlikely that they will prevent Trump from becoming a highly unpopular president again rapidly. This, however, might also propel both authoritarianism within as well as jingoism abroad, ruling through the creation of enemies domestic and abroad.

Jörg Kronauer

What will be the impact of Trump economics on the world economy? What will be more specifically the impact for Europe and/or for the Global South?

Jörg Kronauer The country likely to be hit hardest by Trump economics is China, and that is, of course, no coincidence. It was China which was most severely affected by US tariffs and sanctions during Trump’s first term in office. The same was true during the Biden presidency, and probably nothing else would be the case if Kamala Harris had won the election. The simple reason is that given current circumstances, only China – not the EU, definitely not Russia – has enough clout to seriously threaten US dominance.

This is why Trump has already announced his intention to increase tariffs on imports from China again. By doing so, he still wants to persuade companies selling products on the US market made in their factories in China to leave the People’s Republic and establish factories somewhere else. This, he hopes, could weaken China’s economy. As this strategy hasn’t worked out yet Trump might be willing to reinforce it: to take tariffs up another notch and give it another go.

It is very likely that Trump will further tighten US sanctions against Chinese tech companies, especially against semiconductor fabs. Biden did that as well. His national security advisor Jake Sullivan explained in September 2022 that this had to be done to make sure the US could “maintain as large of a lead as possible” in the most important technologies. According to him, this is the only way to remain number one in the world. To achieve this goal Trump and Biden not only tried to stop China’s rise by sanctioning Chinese companies. They tried as well to lure some of the most advanced semiconductor fabs – TSMC, for example – to build plants in the US. They did that to give the country the most modern, most efficient and most independent economy on earth, to be best prepared to outcompete China. Trump will continue on this path.

For similar reasons, the incoming Trump administration might attach specific importance to Artificial Intelligence (AI). AI is one of the most relevant fields in which rivalry between the US and China is being played out. Many in Silicon Valley believe AI companies could best be unleashed by cutting regulation – AI regulation, of course, but energy regulation as well, as AI servers consume unprecedented amounts of energy. The Biden administration was reluctant to cut too much regulation but Trump is willing to do so. This is why many Silicon Valley capitalists have switched from backing the Democrats to backing Trump. As co-chair of the new DOGE office, Elon Musk is going to serve their interests and cut, cut, cut.

Trump has threatened the EU with tariffs if its member countries don’t increase their oil and gas imports from the US – so, the EU’s energy dependency from the US might increase as well.

For the EU, Trump economics will bring tough times. To start with, Trump has announced new tariffs on imports from all countries, from the EU as well. The aim is to make relocation of factories to the US more attractive. The new tariffs will hurt all exporters to the US, the EU being among the hardest hit as it sells huge amounts of goods to the US, Germany alone being the largest exporter to the country after USCMTA members Canada and Mexico, and after China. EU companies will additionally be hit by Trump tariffs on imports from Mexico as many of them have built factories there to manufacture products for the US market. Mexico combines badly paid labour with easy access to North America which, by the way, is the reason why the EU has a free trade agreement with it.

In the medium to long term, Trump tariffs as well as Biden’s Inflation Reduction Act (IRA) could reinforce the trend to move factories from the EU to the US. High energy prices in the EU may contribute to this as well. The situation has worsened since the EU has started to reduce cheap gas imports from Russia as far as possible and to replace them with expensive LNG imports from the US. Trump has threatened the EU with tariffs if its member countries don’t increase their oil and gas imports from the US – so, the EU’s energy dependency from the US might increase as well. And: at a time when companies may prefer investing in the US over investing in Europe, possible cuts in US AI regulation could easily put European companies at an additional disadvantage against their US competitors.

Last but not least the US economic warfare against China will have consequences for EU companies. US sanctions block some EU trade with China, too. They might even block trade between factories of the same company in Europe and in China. EU companies already have started to sanction-proof their Chinese branches by replacing their European suppliers with Chinese ones and even making contingency plans to cut ties between parent companies in the EU and their Chinese branches if Trump might proceed towards full decoupling. The future looks quite bleak for the EU.

As Trump economics intensifies conflicts with China, the EU and at least parts of the Global South, one of the big questions in 2025 will be how hard those attacked economically will hit back.

For the Global South, Trump economics creates new problems as well. Mexico will be hit particularly hard if Trump makes good on his threats to impose high tariffs on imports from the country: 80 percent of its exports go to the US. Otherwise, Trump has threatened the BRICS countries with crushing tariffs if they should continue to strive for dedollarisation. As dedollarisation means reducing or even taking away the US’ ability to impose sanctions on them it seems unlikely that the BRICS countries will back down altogether although they may want to proceed a bit more cautiously. So, more conflict between them and Trump could lie ahead.

As Trump economics intensifies conflicts with China, the EU and at least parts of the Global South, one of the big questions in 2025 will be how hard those attacked economically will hit back. China has already started to restrict exports of some critical resources to the US. With regard to the EU, it remains to be seen how strongly it will be capable to react. And with regard to the Global South, the big question is how far it will expand its mutiny.

Michael Roberts

What will be the impact of Trump economics on the world economy? What will be more specifically the impact for Europe and/or for the Global South?

Michael Roberts If Trump implements his plans to raise tariffs on all imports into the US in full, with even higher rates for China, this would seriously affect global economic growth and trade. International trade growth has not been matching real GDP growth in the major economies for decades. The world has been de-globalising since the global financial crash of 2008 and since the pandemic slump of 2020.  If US tariffs are raised that will curb any increase in trade even more and could knock off up to 1-2% a year in global growth. If China and other major trading nations retaliate, the annual GDP loss could be even higher. And remember the world economy is only growing at 3% a year anyway. So a trade war could wipe out any expansion.

Will it come to that? Possibly not. Trump’s threats may just be that – designed to force concessions from Europe, Canada and Global South companies to invest in the US and build plants there. If countries promise this, then Trump may lower his threats. But even promises to invest in the US and to ‘make America great again’ will not overcome the underlying trend: namely, the increasing share of manufacturing output and trade going to China and Asia, compared to the US and Europe – and a serious further decline in Europe, with its weaker technological base, higher energy costs (after the loss of cheap Russian energy) and less and less labour force. As in the 1930, trade tariffs, tech bans and so-called national ‘industrial policies spell depression, particularly for Europe. It will be even worse for the Global South countries, many of which are close to default on their debts because export revenues cannot sufficiently fund debt servicing costs.

What will be the impact of Trump economics on the domestic economy, for capital and for the working class?

Michael Roberts If Trump applies his tariffs policies in full, it will most likely keep US inflation higher than it would have been otherwise and certainly higher than the Fed’s target of 2% a year. That will most likely hit real incomes for average American households. The only counteracting factor is if the US dollar strengthens because the interest yield on holding dollars compared to euros or other countries currencies rises, thus making it attractive to hold cash and financial assets in dollars.

As in the 1930, trade tariffs, tech bans and so-called national ‘industrial policies will spell depression, particularly for Europe. It will be even worse for the Global South countries, many of which are close to default on their debts.

Any increased investment into the US from Asia etc, is unlikely to compensate in the form of better paid and skilled jobs for Americans. Indeed, it is more likely to lead to increased immigration of skilled (but cheaper) foreign staff under the US visa system (while expelling unskilled immigrants). Trump plans to renew his previous tax cuts and extend them further.  This will benefit all his billionaire mogul friends, at the expense of significant cuts in public services, reductions in Medicare and other hits to the ‘social wage’ for most Americans. At the same time, the public sector deficit is historically very high and the public debt to GDP level has reached post-war highs. That will drive borrowing rates (mortgages, corporate loans etc) upwards, not downwards. Fiscal austerity will be the name of the game, alongside monetary easing. Ironically, this could lead to a fall in the dollar, the opposite result from trade tariffs.

The jokers in the pack for 2025 onwards are the geopolitical risks. The war in Ukraine is likely to continue through the year with further heavy loss of life and limb. Israel will consolidate its destruction of Gaza and the annihilation of its people, without opposition. European leaders will increase defence spending at the expense of public services and pensions for their people.  Incumbent governments may fall in elections, as they did in 2024, leading to increased political paralysis.

With the fall of the Assad regime in Syria, there is a serious risk of outright war between Israel and Iran, supported by Trump. That could drive up energy prices and hit living standards for hundreds of millions. And the potential conflict between the US and China over technology, tariffs and Taiwan will intensify. The rest of this decade is full of danger – and don’t forget global warming.

But maybe AI will save the day!

Peter Mertens

What will be the impact of Trump economics on the domestic economy, for capital and for the working class?

Peter Mertens We are in an era where the weight of the global economy is shifting toward Asia, particularly to China and India. China is a rapidly emerging superpower. In contrast, the United States is an empire in the early stages of decline, while the European Union is a superpower that has already been in a longer, gradual decline.

The tectonic plates of global power are shifting; our world is undergoing significant changes. As the saying goes, “When the winds of change blow, some people build walls, while others build windmills.” Washington, aware of the economic challenge posed by China, launched its Pivot to Asia strategy back in 2011 under President Obama. U.S. foreign policy has since shifted its focus from the Middle East to East Asia, particularly China.

Step by step, first under Obama, then under Trump I and Biden, a new policy emphasizing protectionism, tariff walls, and subsidies for domestic industries has taken shape. Simultaneously, ever more countries are being subjected to unilateral sanctions by Washington, and the United States has gradually escalated economic confrontation with its “systemic rival.”

The U.S.-China Trade War

“To me, the most beautiful word in the dictionary is tariff,” Trump remarked during the 2024 election campaign. This was already evident during his first term, when he quickly erected high tariff walls. In less than three years of Trump I, import tariffs were imposed on some $350 billion worth of Chinese imports.

Trump II plans to further escalate and intensify this trade war. He has proposed increasing import tariffs on China by 60 percent and on cars imported from Mexico by as much as 500 percent. Overall, Trump intends to impose tariffs on imports from countries worldwide, ranging from 10 to 20 percent.

The European Union is an “old” superpower that has been in decline for some time. Rather than centrally investing in the development of new technologies, it has imposed austerity measures, economizing itself into stagnation.

“If Trump implements all his plans regarding trade and tariffs simultaneously, the world could face one of the most severe trade disruptions and trade wars since the 1930s,” journalist Lieve Dierckx of Belgian financial newspaper “De Tijd” stated. Such a trade war — in which every tariff leads to a retaliation and every import restriction triggers a countermeasure — is already unfolding in critical technological and economic sectors like artificial intelligence, data protection, and semiconductors.

China Reduces Its Long Term Dependence On The U.S. Market.

Technological advancements, alongside class struggle, have historically driven global history. Today, the world is transitioning toward (a) fossil-free production, and (b) the adoption of artificial intelligence. The essential technologies, resources, and infrastructure required for this transition include batteries, semiconductors, lithium, cobalt, nickel, and graphite.

In the 19th century, Europe (led by Britain) pioneered the technology of the first industrial revolution. In the 21st century, however, China is at the forefront of several critical technologies. China’s rapid technological advancements are remarkable.

In the short term, China is likely to be affected by the impact of new U.S. import tariffs. At the same time, the wave of ongoing sanctions and coercive measures has already prompted China to accelerate the development of its technologies and production capacities. This is clear in the progress China has made in semiconductor chips and operating systems.

In the long run, this will help China reduce its dependence on the U.S. market. China is also diversifying its economic space, with its Belt and Road Initiative (often called the new Silk Road) playing a key strategic role.

So what should Europe Do?

If Trump further increases his import tariffs, the consequences for Europe will be inevitable: the U.S. is Europe’s largest export market. For instance, the high tariffs imposed during Trump I on foreign steel and aluminum, significantly impacted Europe. The European economy is now even more vulnerable.

The European Union is an “old” superpower that has been in decline for some time. Rather than centrally investing in the development of new technologies, it has imposed austerity measures, effectively driving itself into stagnation. Rather than seeking revenue from the obscenely wealthy, the EU pursued policies favoring large multinationals while further harming itself further with sanctions against Russia.

Bloc thinking, which reduces the world economy to two large rival blocs, does not benefit the planet.

The industrial heart of Europe, Germany, has been hit particularly hard by the resulting energy switch. Industrial production has particularly declined in energy-intensive sectors like chemicals and steel. Germany, the largest economy in the Eurozone and the third-largest in the world in nominal GDP, has slipped into recession. Almost no Eurozone economy is growing more than one percent annually; the average is a mere 0.2 percent.

Together with the industrial subsidy race initiated by the U.S. with the Inflation Reduction Act, this is fueling a process of de-industrialization in the European Union. In this context, if Trump raises import tariffs further, the European economy risks sinking even deeper into crisis.

Protectionism Will Only Strengthen South-South Cooperation

A new wave of protectionism and sanctions under Trump II could further accelerate the South-South development agenda. This paradigm shift is already in motion and is expected to strengthen further. The BRICS countries have forged a pragmatic alliance in response to a “global West” grappling with a deepening crisis. A deepening trade war will only push them to establish even more mutual trade agreements and conclude both bilateral and multilateral free trade deals. Simultaneously, the BRICS countries are advancing new institutions like the New Development Bank and Contingent Reserve Arrangements.

Reducing world trade to a zero-sum game, where one wins and one loses, is playing with fire. Bloc thinking, which simplifies the world economy into two major rival blocs, benefits no one, least of all the planet.

The upcoming shocks may surpass any we have experienced over the past three decades. The shocks can come from any direction. That also depends on us—on the Left’s ability to seize new opportunities. It is up to us to have confidence in people’s capacity to mobilize, organize, and pursue a socialist perspective. It is our task to inspire the working class with a genuine socialist vision of emancipation, peace, and international cooperation. Socialism stands as the alternative to the barbarism of this system.

What will be the impact of Trump economics on the domestic economy, for capital and for the working class?

Peter Mertens Trump’s election marks the ascendancy of the most reactionary wing of capital in the White House. Trump appears to have learned from his first term and is now preparing to purge the administration entirely. This task is expected to be entrusted to billionaires Elon Musk and Vivek Ramaswamy. They will be handed several critical levers of power. This will enable them to introduce a new wave of tax cuts for the billionaire class in the United States and further dismantle numerous regulations.

The Trump administration aims to prioritize confrontation with China, focusing on at least three main axes of response.

The first axis is the war against working people in the US itself. With Elon Musk in the administration, the “ultimate anti-union person” enters government. This threatens to further erode union rights, particularly in the public sector. Meanwhile, Trump has announced plans to impose tariffs, though their exact levels remain unclear. What is certain, however, is their potential to significantly increase consumer prices in the U.S. Trump campaigned as a “friend of the working class” and ran on an anti-inflation platform, but his policies suggest otherwise.

Trump presented himself as a “friend of the working class” and ran a campaign against inflation, but his policies suggest the opposite.

A second key focus of Trump’s strategy is ramping up preparations for economic and military conflict with China. This also includes adopting a more aggressive stance toward Cuba, Venezuela and Iran. Additionally, Trump is offering unconditional support to the most far-right Zionists in Israel. While Trump portrays himself as a “president of peace,” his cabinet appears poised to escalate U.S. military interventions.

The third axis that is taking shape is a war on migrant workers within the United States. There is talk of launching the largest deportation campaign in history. This campaign would likely disrupt agriculture, construction, and hospitality sectors, while driving up prices. Racism serves as a large-scale scapegoating mechanism to justify these measures. This is the classic “divide and conquer” strategy, pursued at the expense of basic human rights.

Continuity Between Biden and Trump.

Half a century ago, in 1973, Henry Kissinger sought to strike a deal with China to form a united front against the Soviet Union. Today, President Trump and Vice President JD Vance have expressed their intention to pursue a “reversed Kissinger” strategy. In other words, they aim to reach an agreement with Russia in order to isolate China. However, it is far from certain that this strategy will succeed. First, because trade between China and Russia has increased significantly in recent years. Second, because this strategy also depends on the outcome of the proxy war between the U.S. and Russia in Ukraine.

Even if Trump seeks a negotiated end to the war in Ukraine, that does not mean he would be opposed to NATO achieving a military victory. The Trump administration is not anti-NATO at all, contrary to claims made by certain democrats in the U.S. and Europe. Trump wants European countries to contribute four to five percent of their GDP to NATO. This will come at the expense of social spending in European countries.

President Trump and Vice President JD Vance have expressed their desire for a “reversed Kissinger” approach.

There is no fundamental qualitative difference between the Trump and Biden administrations. Similarly, there was little difference between Trump I and Obama. “For our adversaries out there that think this is a time of opportunity, that they can play one administration off the other, they’re wrong, We are hand in glove, we are one team,” said new national security adviser Mike Waltz. There will be significant continuity, particularly in foreign policy. It is the same empire, the same imperialist strategy, and the same military-industrial complex.

Trumpism As A Reaction To The Popular Movement

It is often thought in Europe that there is no countermovement in the United States. Nothing could be further from the truth. On the contrary, the past decade has seen a resurgence of popular movements in the U.S.: the labor union movement, Black Lives Matter, the One Million Women’s March, and the major pro-Palestine movement, among others.

Trump’s rise to power must also be understood as a reaction to these movements. Trump was brought to power, in part, to suppress protests in the United States. This is stated almost explicitly in Project 2025, developed by the right-wing Heritage Foundation. Ahead of Trump’s inauguration on January 20, 2025, in Washington, major counter-demonstrations have already been announced in over a hundred cities across the United States. That movement can count on our support.

Rémy Herrera

What impact will Trumponomics have on the world economy? And, more specifically, how will Europe and/or the Global South be impacted?

Rémy Herrera No one can know for sure what Donald Trump has in store for his second term. What we can say, however, is that he will have to set the bar very high if he wants to do worse in the area of international politics than his predecessor Joseph Biden, who successively supported a corrupt Ukrainian government welcoming neo-Nazi elements, a fascist Israeli prime minister carrying out what looks very much like a genocide against the Palestinian people and, more recently, some of the most extremist Islamist groups in existence seizing power in Syria and putting pressure not only on Iran but also Russia. In this context, what could be worse? Provoking a world war by triggering a direct armed confrontation with China, Russia’s strategic ally? However, if we go by Trump’s first tenure, during which no new imperialist military war was ordered – a feat rare enough for a US president to be remembered – this wouldn’t seem to be his intention.

On the economic front, although uncertainties still surround his programme and the team charged with implementing it, we might expect the new Trump administration’s aim to be once again, as in the first term, to attempt to relocate the operations of US transnational corporations to the continental territory of the United States. It is therefore likely that a series of trade wars – and therefore state-induced trade crises – will be launched, in an attempt to forcibly reduce the size of the trade deficit and create jobs in the USA. China would be the main target of this increase in tariffs on imported goods, but the European Union would be one of the collateral victims. Sanctions, in the form of higher tariffs, could also be used against other BRICS members and, more broadly, against countries in the Global South and East that embark on de-dollarisation processes, including the use of currencies other than the US dollar in their bilateral trade operations, particularly in the energy and metals markets.

While the BRICS continue to make headway as a common entity – and this is a good thing, from the perspective of shaping the contours of a more balanced and just multipolar world – this progress is not without its difficulties and contradictions. Several countries in the Global South, starting with India, have already made it clear that they do not intend to de-dollarise. Even Russia and China’s strategies are not, for the moment, to attack the dollar head-on, but to see the rouble and yuan (or alternative currencies invented by these two countries, such as the gold-backed petroyuan) occupy more space, to be able to operate with greater sovereignty, gradually building a multipolar currency world. So the BRICS still have a long way to go before they can extricate themselves from dollar domination.

The likelihood of new trade wars will be coupled with that of new currency wars, especially between the dollar and the yuan, which could seriously impact the euro.

Under such conditions, it’s easy to see that the likelihood of new trade wars will be coupled with that of new currency wars, especially between the dollar and the yuan, which could seriously impact the euro. And the European Union is already undermined by deep and multiple internal contradictions and rivalries, condemned to absurd austerity by the eurozone mechanism and the institutionalisation of neoliberalism that accompanies it, weakened by the lingering recession currently affecting the German economy and, moreover, now turned into a proxy battlefield by NATO – the military arm of Washington, for which it had become vital to divert Europeans from their own interest of maintaining peaceful relations with Russia and, beyond that, mutually beneficial ties with China.

Europe is in danger of sinking further into its submission to the technocratic, anti-democratic Eurocracy that runs it, a Eurocracy that bows to the dictates of the big German conglomerates (Konzern), which have no wish to clash with their American rivals, themselves under the thumb of globalised high finance. Could we have forgotten that Washington still has numerous military bases in Germany and many other European countries – supposedly to ensure their security? The peoples of Europe will very soon have to realize that not only do they need to get out of the euro and the system of intra-regional imbalances it is creating but also to put a stop to this cascade of dependencies and this insane logic of decline and destruction, this capitalist spiral of crises and wars that will only ultimately lead them to neofascism.

While the BRICS continue to make headway as a common entity, this progress is not without its difficulties and contradictions.

But it’s clear that the conflicts currently pitting the dominant fractions of the ruling classes in the United States against each other – that is, the various components of high finance, or the various huge oligopolies making up finance capital, which will steer the course that the dynamics of the US economy may ultimately take – go far beyond the person of Donald Trump alone and his own plans as the new president. It is these conflicting forces that we need to understand, beyond the spectacle of political life and the crisis of democracy it reveals. This means that Trump represents, in part, certain fractions within the dominant classes of US high finance, particularly those that need to prioritize activities carried out within the continental territory of the USA to realize their profits; and this is in opposition to other dominant fractions within these same dominant classes of US high finance whose interests are embodied, rather, in the leadership of the Democratic Party and whose strategy, clearly more globalized, requires the weakening of national sovereignty to prosper.

The working classes, on the other hand, can expect nothing good of what is coming: a regression in human and social rights (especially those of women), a reactionary outpouring of anti-immigrant racism, a brutal attack on the environment, neo-conservative measures which, by reducing public services and favouring the most wealthy, will prove incapable of stemming the worsening of the systemic crisis of capitalism and preventing the retreat of US hegemony.

Sam Gindin

What will be the impact of Trump economics on the domestic economy, for capital and for the working class?

Sam Gindin Trump’s return to office has a lot of progressives focused on how bad his economic policies will be, as part of generating popular resistance. Three things seem worth emphasizing from the outset. First, we aren’t going from good times for working people to horrid times. The last few decades, most under Democratic administrations, were disastrous in terms of rising inequalities and insecurities and narrowed down working-class lives to basic survival. The past set the stage for Trump in terms of frustrations, demoralization, and a lowering of expectations.

Second, the main pushback against Trump may come from some of his allies and from business. High and general tariffs on cheaper goods from abroad can’t help but increase prices. Retaliation abroad might also hurt some US exports and jobs. Or retaliation may take the form, hinted at by China, of limiting supply chains.The damage such disruptions can bring having been witnessed during the COVID years.

Similarly, the expulsion of immigrants means a loss of low-wage labour that supplies much of our food, again tending to push prices up and will cause disruptions in sectors like hospitality and small manufacturing. Businesses will pocket their tax cuts, express gratitude to Trump for removing social regulations to their power, and solemnly praise undermining union attempts to balance class relations. They will promise to act ‘responsibly’. But will then look to get Trump to moderate the policies they don’t like because they ‘undermine the global free trade order’.

We aren’t going from good times for working people to horrid times. The past has set the stage for Trump in terms of frustrations, demoralization, and a lowering of expectations.

Third, the expectation that workers will see through Trump, resist his assaults on their lives, and so develop into a united social force is a hope, but not something to expect in the short term. The long years of defeat can’t be turned around in a flash. The lessons learned in this latest phase of capitalism will not automatically be the right ones. If Trump stumbles, the Dems may simply conclude that all they must do is wait him out and perhaps move a little to the right to replace him. And even working-class Trump supporters without a more coherent frame, may blame those who resisted Trump’s economics – protestors, unions, the ‘deep state’.

Trumpist economics will obviously be harmful to workers. The tax cuts will move full steam ahead and the consequent budget deficit will lead to panicked calls to fix the deficit (i.e. cut social programs like health care, education and social assistance). The attacks on China will accentuate ‘competitiveness’ and affirm the need to ‘moderate’ domestic wage demands and labour legislation. In other cases, such as the tariffs Trump might, in response to the negative impacts on the economy, temper the scale of the tariffs and then claim that his tariff threats were successful bargaining chips to win ‘concessions’ from China. Even on the expulsion of migrants, Trump might slow it down to accommodate business concerns.

The point is that behind the specific policies, even if they do not end up as bad as they originally looked, there is a profound reactionary acculturation around economic issues. The argument that the US is being shortchanged, even if it is the dominant global power, reinforces dangerous nationalist sentiments that won’t go away easily. It even reinforces nationalist sentiments abroad – not against the global corporations responsible for the inequalities and uneven development across the globe but against people from other nations, who are much like themselves. And doing nothing about the environment is not being ‘neutral’, but stealing four more precious years that we desperately need to restructure our economy in terms of how we work, live, travel, experience life.

Behind the specific policies of Trump, even if they do not end up as bad as they originally looked, there is a profound reactionary acculturation around economic issues.

Moreover, the ‘economic’ questions will be overshadowed by how Trump responds to sporadic resistance. He will probably undermine even the limited democracy that exists in America: criminalizing protests, removing critical thinking from school curriculums, channeling university funds into whatever is useful for capital, not human development, spending more on prisons than childcare.

There is limited value in speculating about how bad things are going to be. We don’t know yet, but we do know that on the one hand they will be bad enough and on the other, in the current state of the left in the US, there is limited prospect of near-term significant victories. Moreover, we must come to the appreciation that the main issue is not developing ‘good policies’. We are living in a time of polarized options and even good policies will not be enough, if we don’t transform the structures of power. Without that, the policies we wish for are only wishes, not achievable visions of an alternative world.

If we don’t want to wallow in what Trump will do to us, there is only one starting point. Identifying the building of everyday social power – the deepest sustained organizing – is ‘everything’.

Footnotes

  1. https://www.washingtonpost.com/business/interactive/2024/us-sanction-countries-work/
  2. https://www.cbpp.org/research/federal-tax/the-2017-trump-tax-law-was-skewed-to-the-rich-expensive-and-failed-to-deliver
  3. https://www.epi.org/publication/decades-of-rising-economic-inequality-in-the-u-s-testimony-before-the-u-s-house-of-representatives-ways-and-means-committee/
  4. https://www.pewresearch.org/short-reads/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/
  5. https://www.nytimes.com/2024/11/13/business/economy/consumer-sentiment-trump.html