Trump's Protectionist Trade Policy

Protectionist revenants

Donald Trump's trade policy

The lessons that bourgeois politics and economics learned from the crises of the 1930s have long been forgotten by Donald Trump's entourage.

Commentary

By Tomasz Konicz

What will happen when competitors no longer see any reason to accept the US dollar as the world's reserve currency?

[This article posted on 3/20/2025 is translated from the German on the Internet, https://jungle.world/artikel/2025/12/trump-zoelle-handelspolitik-protektionistische-wiedergaenger.]

Would you like a little more? When it comes to tariffs and trade barriers, the US president is known for pulling out all the stops. Donald Trump responded to the EU's announcement of retaliatory measures against US tariffs on aluminum and steel, which include alcoholic beverages, by threatening astronomical punitive tariffs of 200 percent on European wine and sparkling wine.

So far, this escalation strategy has worked: when the Canadian province of Ontario announced a 25 percent tax on electricity exports to the US as part of the North American trade war, Trump immediately threatened to double US tariffs on all Canadian metal imports to 50 percent – Ontario then withdrew its export tax.

Trump is speculating that he can ride out the short-term turbulence caused by the major protectionist shift in order to achieve the hoped-for long-term returns in the form of a reindustrialization of the US before the next elections.

The US actually has a strategic advantage in the trade wars because it has a huge trade deficit (918.4 billion dollars in 2024). This is likely to decline in the course of trade wars, while most of the US's trading partners are likely to see their exports shrink.

Trump is speculating that he can weather the short-term turbulence caused by the major protectionist shift in order to achieve the hoped-for long-term returns in the form of reindustrialization of the US before the next elections. In effect, the US wants to reindustrialize itself at the expense of countries and economic regions whose export industries have so far benefited from US trade deficits, which have acted as a credit-financed economic stimulus program.

Lubricant of globalization

The US resembled a black hole in the global economy, absorbing industrial surplus production in order to be able to borrow in the world's reserve currency, the US dollar, on the rapidly expanding financial markets. As the center of neoliberal financialization of capitalism, the US saw huge export surpluses flow in as part of ever-growing deficit cycles, while a stream of debt instruments and securities flowed in the opposite direction, making China the US's largest foreign creditor for many years (currently it is Japan).

The global total debt, which grew faster than global economic output in the neoliberal era (from around 110 percent at the beginning of the 1970s to more than 237 percent in 2023), was the lubricant of globalization, precisely because of these deficit cycles.

Trump is a product of crisis

This neoliberal debt tower, which created the illusion of financial market-driven growth in the US, gave rise to a veritable global economy of fictitious capital that became unstable with the bursting of the real estate bubble in 2008 and unsustainable with the surge in inflation from 2020 onwards. Trump is thus a product of crisis, his protectionism intended as a response to the social disintegration processes that accompanied deindustrialization and the faltering of the financial bubble economy. And it is no coincidence that the whole thing resembles the protectionism of the fascist-leaning 1930s, when the world system was gripped by the greatest crisis it had ever seen.

Trump effectively wants a complete break with the credit-fueled crisis postponement of the neoliberal era. But the system can only run on credit, and at the same time, the consequences of this global deficit economy are socially, economically, and above all politically almost unbearable. This contradiction is clearly evident, for example, in Trump's protectionist zigzag course.

Signs of weakness

Ultimately, the White House is currently destroying the US hegemonic system established in the post-war period, as the US can no longer bear the costs of this hegemony, or is no longer willing to do so. Instead, Trump is setting out to build a US empire that no longer relies on a global network of institutions and rules to exercise power, but will presumably assert itself through direct, ultimately military force.

And that is not a sign of strength, but of weakness. Trump's narrow-minded crisis imperialist calculation, which perceives the deindustrialization of the US as the result of fraud by foreign competitors, will be exposed at the latest when these very competitors no longer see any reason to accept the US dollar as the world's reserve currency.