The Goals of Trump’s New Tariff Wars
Illustration above: Original by Aislin, in Maud Barlow, “Parcel of Rogues – How Free Trade is Failing Canada”; 1990 Toronto
Trump’s Tariffs 2025 – and what his goals are
March 14, 2025; Minor amendment to below introduction 16 March, 2025.
Introduction
In the run-up to the 2025 USA Presidential elections, the now elected President Trump made it quite clear that he was going to revive his plans for new tariffs. These tariffs only renew those threats that he had made under the first Trump Presidency. We have discussed Trump’s prior goals in his first Presidency, and the overall results he achieved then. See the Overall Introduction to this full series of articles on the Trump Era – Introduction .
The jagged, seeming chaos that surrounds the current Trump Presidency ‘stop-start-stop-start’ pronouncements of tariffs is clear. This is a typical, but intentional strategy of bluster and confusing bombast. It is often dismissed as being relatively trivial by critics of Trump.
But what is far less understood is that there is a clear strategy here, which is not so far off from the USA government’s prior policies. It is aimed at repairing falls in the capitalist rates of profit in the USA.
In this piece we discuss the goals and effects of Trump’s new round of 2025 tariffs.
We will argue here that there is a continuity across both major USA political parties. It is true this continuity was slightly broken – but we emphasise only slightly – by President Obama. This continuity can be traced as follows:
From the Smoot-Hawley 1930 tariffs – extending to;
1950 and the final refusal to endorse the International Trade Organisation; to
Republican President Ronald Reagan rejecting free trade, and pushing for the North American Free Trade Agreement (NAFTA) with Canada and Mexico; to
Republican President Bush negotiating final details on NAFTA further;
Democratic President Clinton signing the final first NAFTA in 1993;
Democratic President Obama negotiating the Trans-Pacific Trade Pact (TPP) in 2015 and re-negotiating NAFTA to be folded into the TPP – but against much objection from the trade union leaders and the Democratic Party itself – including Bernie Sanders and Hilary Clinton (who was standing for the Presidency).
But Obama’s re-negotiation of NAFTA was quickly terminated in 2016 by Republican President Trump in his first Presidency.
We do not believe there has been adequate attention to this continuity. For it denies that Trump represents some sort of a unique break in so far as his trade polices are concerned. In a later article we will consider the break in policy to the European Union (EU) – which however is a distinct new feature.
In this piece we discuss the goals and effects of Trump’s new round of 2025 tariffs.
As we are completing this article, Trump is particularly raging against in Canada. Today 11 March, 2025 he has again renewed his call for Canada to become the 51st State – relinquishing any independent nationhood.
This demand – so shocking to many Canadians – is not actually new. But in Canada of course, it has relit the fuse of a nationalism, which only clouds up working class strategies for the future.
This article then, tries to place Trump – in the right context. He is thus – as we see it – firmly in the tradition of the USA imperialist who has always – not just now put “America First” and wanted to “Make America Great”. Yes, he behaves outrageously and as a buffoon. But – his goals are those of the majority of the USA imperialist class. So much so that one has to wonder retrospectively – we did not clearly see this before – if the failure to effectively mobilise against him on the election was quite deliberate.
Nonetheless, the working class of all countries, and of course the of the USA – knows its enemy. That is – The USA capitalist class. They stand behind Trump, Musk, Bezos and all the other attention seeking figures and billionaire technocrats who are strutting on the visible flood-lit stage.
We define the term ‘Free Trade” as follows:
“Free Trade: international trade that is carried on without the imposition of tariffs, import quotas etc. Advocated by Adam Smith. Free trade took place in association with Laissez Faire , gradually replacing mercantilism from the 18th century onwards… The policy of free trade came under pressure after World War I and in the face of adverse trading conditions was finally abandoned with the introduction of a general tariff in 1932.”
(A Dictionary of British History, J.P. Kenyon. London, 1981. p.145)
Tariffs and duties fall under a category termed ‘protectionism’ – that isolates a country from the free import into one nation of goods and services from another exporting nation, unless a tax is paid. Such a tax or duty – termed a tariff – is paid to the import receiving nation.
Before diving into the details of how the USA capitalists approached the question of trade and protectionism – it is sensible to take some class bearings. We therefore begin by briefly considering the views of Karl Marx and Frederick Engels on Free Trade. They always clearly analysed these from the viewpoint of the working class.
- Marx and Engels, On ‘Free Trade’ – Developing British Industrial Capital
Free Trade in its ‘pure’ sense properly refers to the completely unfettered trade – that was an ideal – as postulated by classical economists including Adam Smith. In the 17th and 18th centuries it did carry some progressive connotations. But for Marx, its primary benefit was to hasten the end of capitalism by maximising the contradictions with capitalism. This would be to the gain of the working class.
Marx’s attitude to free trade was therefore equivocal.
In the battle between the capitalists and the landlord aristocracy, the former raised the cry for Free Trade. This aimed to accelerate labour’s leaving of work on the land, and to force labour into the factory to drudge for the capitalist. However the cost of food – in particular bread made from corn – was high. This meant the capitalist revenue from the surplus value made from the labourer was lowered, since wages had to incorporate that higher price of ‘grain’ (or in the English parlance of then – ‘corn’). So the capitalists were interested in lowering the price of bread, so they in turn could lower wages. In contrast, the landowners benefited from a high price of corn – and did not care about the cost of bread to the workers. They wanted barriers against the entry of foreign grain.
The protective tariffs against foreign corn (grain) were called the Corn Laws and they protected profits of the landowning aristocrats. The landowners remained undisturbed in their landed estates. They made profit from the land using their feudal rights over the rural labourers. The tariffs or duties in question, were the ‘Corn Laws’, which were enacted first in 1815:
“The Corn Laws were tariffs and other trade restrictions on imported food and enforced in England (Great Britain) between 1815 and 1846. The word corn in British English denotes all cereal grains, including wheat, oats, and barley.“ Wikipedia
Putting duties on cheap corn (grain) – for example from the USA – coming into Britain, ‘protected’ the British home market from competition. That would have lowered prices of corn (grain) and thus of bread. In comparison to corn (grain) which was grown in the USA which had no feudal mode of production, English grain was produced under a feudal system. Hence British grown grain was more expensive. For their profits, the landowning aristocrats levered up the price, even higher then an already expensive cost of production.
All this, as we noted, raised the cost of bread for the labourer. In effect, in Marx’s words:
“In every country where manufacturers discuss free trade they have in mind chiefly Free Trade in corn or raw material generally. To burden foreign corn with protective duties is infamous, it is to speculate on the hunger of the people.”
(Karl Marx, ‘Speech on the Question of Free Trade’ – delivered to the Democratic Association of Brussels at its’ Public Meeting of January 9,1848; in Marx and Engels; Collected Works; Volume 6; Moscow, 1976. p.450.)
Thus the Repeal of the Corn Laws was demanded by the capitalists. Their ‘prize-fighter economists’ believed that would lead to lower prices of grain, hence of bread. The manufacturers claimed that this was to ‘help the workers’. Marx sarcastically noted that:
“Cheap food, high wages, for this alone the English free traders have spent millions. . . and generally speaking, all those who advocate Free Trade do so in the interests of the people.”
Karl Marx, Speech on the Question of Free Trade; in M& E CW; Volume 6; p.450
But as Marx pointed out that the workers seemed to be “ungrateful” for this ‘kindness’:
“But strange to say! The people for whom cheap food, is to be procured at all costs are very ungrateful.” Marx, Speech on the Question of Free Trade Ibid p.450
So why would this have been?
As Marx saw the matter, it was simply because the English workers – led by the Chartist movement – had understood the hypocrisy of the industrial capitalists. Because the capitalists wanted cheaper bread, in order that they could cut the wages of the labouring class:
“The people see in these self-serving gentlemen, in Bowring, Bright & Co., their worst enemies and the most shameless hypocrites. . . The English workers have appreciated to the fullest extent the significance of the struggle between the lords of the land and of capital. They know very well that the the price of bread was to be reduced in order to order to reduce wages, and that the profit of capital would rise by as much as rent fell. Ricardo the apostle of the English Free Traders, the leading economist of our century, entirely agrees with the workers on this point… he says:
“If instead of growing our own corn. . . we discover a new market from which we can supply ourselves. . . at a cheaper price, wages will fall and profits rise. The fall in the price of agricultural produce reduces the wages not only of the labourer employed in cultivating the soil but also of all those employed in commerce or manufacture.”
Marx, Speech on the Question of Free Trade, Ibid. p.450; 457.
Thus the British Free Traders – the capitalists – the industrialists – in effect were only interested in Free Trade, specifically in this instance of corn (grain), in order to then drive down the wages of their captive workers.
Marx thought this lowering of wages was an inevitable consequence of a lower price of grain. This followed since the working man’s wages for labour power – was an exchange for the commodity of labour power. This was an exchange of value. Namely, wages for labour power. Here the equivalent was of the socially necessary labour time taken to reproduce labour power. If the price of bread fell, then the value of labour power fell:
“Doubtless, if the prices of all commodities fall – and this is the necessary consequence of Free Trade – I can buy far more for a franc than before. And the workingman’s franc is as good as any other man’s. Therefore the Free Trade must be advantageous to the workingman. There is only one little difficulty in this, namely that the workingman, before he exchanges his franc for other commodities, has first to exchange his labour for the money of the capitalist. … If all commodities are cheaper, labour, which is a commodity too, will also fall in price.”
Marx, Speech on the Question of Free Trade; Ibid; Vol 6; p.458
Moreover Marx explained that the classical economists proposing Free Trade, had derived their laws with an assumption of “commercial freedom”. In that case, the maximisation of profit required the tendency to drive wages towards the “minimum wage”:
“These laws are confirmed in proportion as Free Trade is adopted. The first of these laws is that competition reduces the price of all commodities to the minimum cost of production. Thus the minimum wages is the natural price of labour. And what is the minimum of wages? Just so much as is required for production of the articles absolutely necessary for the maintenance of the worker, for the continuation, by hook or by crook, so his own existence and that of his class… This law of the commodity labour, of the minimum wages will be confirmed in proportion as the supposition of them, and for f the economists, Free Trade, becomes an actual fact. Thus of two things one: either we must reject all political economy based on the assumption of Free Trade, or must admit under this same Free trade the whole severity of the economic laws will fall on the workers.”
Marx, Speech on the Question of Free Trade, Ibid, Vol 6; p. 462-3.
The workers did in fact aid the manufacturers in their struggle against the landowners in this aspect of the attack on the Corn Laws. However this was not in a complete naivete. Because their Chartist leaders appreciated the motives of the capitalists. However it was for them, and for Marx – a tactical issue.
At the same time, the working class led by the Chartists also demanded the limitation of their factory working hours – or the ‘Ten Hours Bill’. This the aristocratic landowners were only too willing and happy to support, in a ‘panting revenge’ upon the capitalists. So the workers allied with the ‘Tories’ or landowning gentry against the capitalists:
“threatened in their holiest interest, the rent of land, the Tories thundered with philanthropic indignation against the “nefarious practices” of their foes. . . The years 1846-47 are epoch-making in the economic history of England. The Corn Laws were repealed; and of the duties on cotton and other raw material. . . free-trade was proclaimed as the guiding star of legislation; in short, the arrival of the millennium. On the other hand, in the same years, the Chartist movement and the 10 hours’ agitation reached their highest point. They found allies in the Tories panting for revenge. Despite the fanatical opposition of the army of perjured Free-traders, headed by Bright and Cobden, the ‘Ten Hours’ Bill, so long struggled for, went through Parliament.”
Karl Marx; Das Kapital Volume 1; “Chapter Ten: The Working-Day; Section 6: The struggle for the normal working-day. Compulsory limitation by law of the working-time. The English factory acts, 1833 to 1864”; in p. 393; 395; London 1990 Tr Ben Fowkes; also in a version at MIA
Ultimately, Marx recommends that the working class should decide upon Free Trade – only in so far as it related to the strategic goal of defeating the capitalist class system. As he says:
“The English workingmen have shown the English Free traders that they are not the dupes of their illusion or lies, and if in spite of this the works have made common cause with the manufacturers against the landowners, it is for the purpose of destroying the last remnant of feudalism, that henceforth they have only one enemy to deal with.”
K.Marx, Speech on the Question of Free Trade, Ibid, p. 457
Clearly therefore, Marx again places his analysis of Free Trade within the basic class antagonism. He was always explicit in pointing to the ultimate fact of class war:
“To sum up: What is Free Trade under the present conditions of society? Freedom of Capital. When you have torn down the few national barriers which still restrict the free development of capital, you will merely have given it complete freedom of action. So long as you let the relation of wages-labour to capital to exist, no matter how favourable the conditions under which you accomplish the exchange of commodities, there will always be a class which exploits and a class which is exploited.”
K.Marx, Speech on the Question of Free Trade, Ibid, p.463.
It is true that counter-revolution brutally suppressed the Chartist movement:
“Meanwhile, however, the fiasco of the Chartist party whose leaders had been imprisoned, and whose organisation dismembered, had shattered the self-confidence of the English working class. Soon after this the June insurrection in Paris and its bloody suppression united, in England as on the Continent, all fractions of the ruling classes, landlords and capitalists, stock-exchange sharks and shop-keepers, Protectionists and Freetraders, government and opposition, priests and freethinkers, young whores and old nuns, under the common slogan of the salvation of property, religion, the family and society. Everywhere the working-class was outlawed, anathematized, placed under the ‘loi des suspects’ (law of suspects).“
Karl Marx; Das Kapital Volume 1 “Chapter Ten: Section 6: Ibid; p.397 at: https://www.marxists.org/archive/marx/works/1867-c1/ch10.htm#15
Marx also rebutted any pretences by the economists of the Free Trade school such as Adam Smith – who had argued that commercial relations made for more peaceful relations between countries. Marx had this to say:
“We have shown what sort of fraternity Free Trade begets between the different classes of one and the same nation. The fraternity which Free Trade would establish between the nations of the earth would not be more real; to call cosmopolitan exploitation universal brotherhood is an ideal that could only be engendered in the brain of the bourgeoisie. Every one of the destructive phenomena to which unlimited competition gives rise within any one nation is reproduced in more gigantic proportions in the market of the world.”
K.Marx, Speech on the Question of Free Trade; Ibid Vol 6; 464)
Nonetheless, in fact Marx was ‘for Free trade” – but only because it would accelerate “the uniting of contradictions” resulting in the “emancipation of the proletariat”:
“Is that to say we are against Free trade? No, we are for Free Trade, because by Free Trade all economic laws, with their most astounding contradictions, will act upon a larger scale, upon a greater extent of territory, upon the territory of the whole earth; and because from the uniting of all these contradictions into a single group, where they stand face to face, will result the struggle which will itself eventuate in the emancipation of the proletariat.” Karl Marx, “The Protectionists, the Free Traders and the working class”; written September 1847; Marx and Engels CW Volume 6; p. 290
But Marx ended with only a very limited vote for free trade:
“Generally speaking in our time the Protective system in these days is conservative, while the Free Trade system works destructively. It breaks up old nationalities and carries antagonism of proletariat and bourgeoisie to the uttermost point. In a word, the Free Trade system hastens the Social Revolution. In this revolutionary sense alone, gentlemen, I am in favour of free trade.”
Marx, Vol 6; Ibid, p. 465
Marx also explicitly pointed out that protectionism was a ‘weapon’ wielded by capitalists against its international competitors:
“Herr List and Herr v Gulich . . . summarise their philanthropy in the following words: It is better to be exploited by one’s fellow-country-men than by foreigners. . . . The system of protective tariffs places in the hands of capital of one country the weapon which enables it to defy the capital of other countries; it increases the strength of this capital in opposition to foreign capital, and at the same time it [i.e.‘they’ – protectionists – ed] deludes itself that the very same means will make that same capital small and weak in opposition to the working class.” Karl Marx, “The Protectionists, the Free Traders and the working class”; written September 1847; Marx and Engels CW Volume 6; p. 280-81
Not only was protectionism a ‘weapon’ of a local bourgeoisie, it was also a way of exploiting its’ “fellow countryman even more” than by foreign capitalists:
“Since the bourgeois now hopes to become rich mainly through ‘‘protective tariffs,’’ and since protective tariffs can enrich him only insofar as no longer Englishmen, but the German bourgeois himself, will exploit his fellow countrymen, indeed exploit them even more than they were exploited from abroad, and since protective tariffs demand a sacrifice of exchange values from the consumers (chiefly from the workers who are to be superseded by machines, from all those who draw a fixed income, such as officials, recipients of land rent, etc.), the industrial bourgeois has therefore to prove that, far from hankering after material goods, he wants nothing else but the sacrifice of exchange values, material goods, for a spiritual essence. Fundamentally, therefore, it is solely a matter of self-sacrifice, of asceticism, of Christian grandeur of the soul.“
Karl Marx, “Draft of an article on Friedrich List’s book: Das Nationale System der Politischen Oekonomie”: CW Marx and Engels, Moscow 1975; Vol. 4, p. 275
We can see this ‘weapon’ being wielded today by President Trump.
Elsewhere Marx summarised the historic role of protectionism to create a “modern mode of production” – at least in England, as follows:
“The system of protection was an artificial means of manufacturing manufacturers, of expropriating independent labourers, of capitalising the national means of production and subsistence, and of forcibly abbreviating the transition from the medieval to the modern mode of production.” Karl Marx; ‘Das Kapital’ Volume 1; London 1990 Tr Ben Fowkes; Chapter 31; p. 992. A version is at MIA.
In his introduction to a pamphlet by Karl Marx ‘On the Question of Free trade” – Engels also summarised the previous historical role that protectionism had played. It had been with this that English industry had been developed. But then when it was developed England ‘forcibly opened’ markets for English goods proclaiming Free trade:
“It was under the fostering wing of protection that the system of modern industry – production by steam-moved machinery – was hatched and developed in England during the last third of the 18th century. And, as if tariff protection was not sufficient, the wars against the French Revolution helped to secure to England the monopoly of the new industrial methods. For more than 20 years, English men-of-war [warships – Ed] cut off the industrial rivals of England from their respective colonial markets, while they forcibly opened these markets to English commerce. The secession of the South American colonies from the rule of their European mother countries, the conquest by England of all French and Dutch colonies worth having, the progressive subjugation of India turned the people of all these immense territories into customers for English goods. England thus supplemented the protection she practiced at home by the Free trade she forced upon her possible customers abroad; and, thanks to this happy mixture of both systems, at the end of the wars, in 1815, she found herself, with regard to all important branches of industry, in possession of the virtual monopoly of the trade of the world.”
Frederick Engels; “Protection and free trade. Preface to Speech on the question of free trade, by Karl Marx” 1888: Collected works of Marx and Engels, Vol. 26; Moscow 1990; p.522.
In Summary
Marx makes central a tactical reasoning to enable the working class to move to their emancipation. This lies behind a limited support for free trade. There is no Marxist absolute principle per se – that underlies the support of free trade. But Marx also saw protectionism was a ‘weapon’ – that enabled a bourgeoisie to develop its industry. Engels explicitly points out that the bourgeoisie can be both protectionist and pro-Free trade – whenever it suits them.
2. Lenin on protectionism and Monopoly Imperialism
Later still, V.I.Lenin agreed:
“England became a capitalist country before any other, and in the middle of the 19th Century, having adopted Free Trade, claimed to be the ” workshop of the world “, the great purveyor of manufactured goods to the all countries, which in exchange were to keep her supplied with raw materials. But in the last quarter of the 19th century, this monopoly was already being undermined. Other countries, protecting themselves by tariff walls, had developed into independent capitalist states. On the threshold of the 20th century, we see a new type of monopoly coming into existence…”
V.I.Lenin; “Imperialism, the Highest Stage of Capitalism – A Popular Outline”; Chapter IV ‘Export of Capital’; p. 62. A version at MIA.
The subsequent development of either a Free Trade or Tariff protected market, had only minimal effects on the tendency within capital to develop into monopolistic imperialistic capital:
“The facts show that differences between capitalist countries e.g. in the matter of protection or free trade only give rise to insignificant variations in the form of monopolies or in the moment of their appearance; and that the rise of monopolies as the result of the concentration of production is a general and fundamental law of the present stage of development of capitalism…”
Lenin. Ibid, Chapter 1. p.20.
In regards to free trade, or free competition:
“The new capitalism represents a transition to something. It is hopeless to seek for “firm principals and concrete aim” for the purpose of “reconciling” monopoly with free competition … Monopoly is precisely the opposite of free competition; but we have seen the latter being transformed into monopoly before our very eyes, creating large scale industry and eliminating small industry, replacing large scale industry by still larger scale industry finally leading to such a concentration of production and capital that monopoly has been and is the result: cartels syndicates and trusts, and merging with them, the capital of a dozen or so banks manipulating thousands of millions.”
Lenin, Ibid, p. 46; p.88.
Of course Lenin also makes quite clear that he foresees even further super monopolies developing and a general acceleration of these above noted features under capitalism. Thus he approves Hobson’s “appraisal of the significance of a “United States of Europe”. He cites Hobsons’ comments:
“We have foreshadowed the possibility of even a larger alliance of Western States, a European federation of great powers which so far from forwarding the cause of European civilisation, might introduce the gigantic peril of Western parasitism..”
Lenin, Ibid, Chapter VIII, p. 103-4.
This presaged the appearance of the European Economic Community (EEC). As always, the pattern of domination was ever changing. Lenin recognised the drift towards groupings of imperialists. Thus he commented on Joseph Patouillet’s “L’imperiliasme americain.” Patouillet had written:
“Since 1897 Wilhelm II has repeatedly put forward the idea of a policy of unification in the struggle against trans-American competition – policy based on European customs agreements, a sort of continental blockade against the United States.”
In the margin against this quote, Lenin wrote: “United States of Europe”. ”
Lenin Collected Works; Vol 39 p.211 and vol 22. p. 273. Cited by M.K. Bunkina: “USA versus Western Europe. New Trends.” Moscow, 1979. p.186.
3. Smoot Hawley
The USA bourgeoisie has a long history of fostering protectionism and high tariffs. In 1930 there was a particular explosion of tariffs. But the Cato Institute – the conservative proponents of free trade in the USA – argues that they were a signal for retaliation from other countries and “accelerated” an onset of economic depression:
“In response to low prices in the farm sector, Congress began drafting the Trade Act of 1930, better known as the Smoot–Hawley tariffs . . .The bill quickly morphed from raising agricultural tariffs to hiking tariffs on thousands of other products—some of which were not even produced in the United States—as it moved through Congress. The result . . . was the largest tariff increase in US history, signed by President Herbert Hoover in June 1930.
The consequences of the unilateral tariff hike were a disaster. . . the tariffs accelerated the US economy’s slide into depression. Major US trading partners retaliated with tariffs of their own aimed at US exports. Global trade dropped dramatically. By 1933, real US gross domestic product had dropped by a third, and the unemployment rate hit 25 percent.”
August 27, 2024; Cato Institute; at https://www.cato.org/publications/how-trade-agreements-have-enhanced-freedom-prosperity-americans
4. Post-War USA Dominance
Soon after the end of World War 2, as the USA led the anti-USSR charge – they began to create a number of new world institutions. The USA meant to imprint its stamp of its imperialist world dominance.
The US had given major loans to the British and French (under ‘Lend-Lease’) which it now used as a lever to obtain the privileges of entry into the sterling and franc semi-colonial territories of the British and French. Britain, for example was now completely beholden to the USA:
“When sales of foreign investments and of gold and dollars are added in, the net change on capital account between the outbreak of war and the end of 1945 amounted to no less than Pounds Sterling 4,700 million. The United Kingdom ended the war with the largest debt in history ”
A.Cairncross. Years of Recovery,British Economic Policy. 1945-51. London, 1985. p. 7.
But the jockeying had begun even before the end of the Second World War, at the Bretton Woods Conference in 1944. The Pound Sterling had already in 1931 been taken off the gold standard by the British, after an international run on the pound. This reflected the decline of British Imperial power. But in 1931, the USA dollar could not yet take the dominant position, it had to wait until after the war.
Then the USA demanded that the dollar be made the key currency for convertibility of all currencies. The dollar was made on par with gold. For all countries signing the Bretton Woods Agreement, their currencies were traded according to their reciprocal value with either gold or the dollar. However:
“The operative standard for most countries is the dollar. . . The exception in the system is the dollar itself, which both in law and in fact is fixed in terms of gold – at $35.00 an ounce. The US is not obliged to intervene in the exchange market; it has only to be prepared to buy and sell gold at $35 and leave it to the intervention of the other central banks to maintain fixed rates to the dollar.”
M.Gilbert. The gold dollar system. p. 231; in The Gold Standard in theory and History. Ed. B.Eichengreen. London, 1985.
The USA did not need to defend the dollar at any particular rate of exchange, until the dismantling of the Bretton Woods Agreement, in 1971.
The Agreement poured gold into the USA :
“Making the dollar a reserve currency meant that central bankers round the world had to have dollars. They had to buy dollars in the marketplace which pushed up the price of the dollar up, threatening the parity of the currency with the dollar. Thus they could only buy when the dollar was weak.. This suited the US and the US Federal Reserve which could follow a very lax monetary policy to make sure that there were always dollars to go around. It worked wonders for post-war US domestic policy, helping promote the wartime dream of full employment.”
Mihir Bose. ” The Crash ” London, 1988. p. 135.
By 1949 the US had acquired 72 % of the world’s gold. The USA was in an unusual position of dominance. It had funded the war for the Western capitalist allies, detonated the Atom bomb thereby showing its military dominance, and had a home base that was unaffected to a large extent by the war. It proceeded to further dictate terms :
“The US Government had taken the lead in 1944 at Bretton Woods to establish the International Monetary Fund (IMF ) and the World Bank. Loans were provided by the U.S. Government and US credit markets via the World Bank to European governments, which used them mainly to pay for goods supplied by American exporters. The source of the original loan funds provided by the IMF came from foreign currency and gold subscriptions by the participating nations. America’s subscription amounted to almost $3 billion and entitled it to nearly 30% of the voting power. The member nations agreed that an 80% majority vote would be required for most rulings, thus conceding unique veto power to the US.. Europe was fully aware that it was ceding to America the option of determining its own currency values and tariffs. The US was the only nation with sufficient foreign exchange to finance a program of overseas investments, long term financing and foreign aid.”
Michael Hudson. Global Fracture, the new international Economic Order. New York, 1977. p. 11-12.
4. The Marshall Plan, and Removing Imperial Preference – The General (GATT) and the ITO
The Marshall Plan was a major means by which the USA intended to control Europe. The Marshall Plan was designed to flood Europe with monies under the strings of the USA, to ensure some dependency. All these steps were taken in lock step. However control of trade was critical to the USA also.
The after-effects of the Smoot-Hawley tariff wars were a stimulus to try to obtain an agreement on world trade to smooth these older tensions away. The result was the negotiations known as the International Trade Organisation (ITO) and the General Agreement on Tariffs and trades (GATT). At the same time as Bretton Woods, therefore GATT was being negotiated:
“The initial purpose of the GATT was to negotiate tariff concessions among members and to establish a code of conduct and procedures for the resolution of trade disputes by negotiation. The core assumption underlying American participation in these efforts to encourage multilateral trade arrangements was that international cooperation in trade and investment created harmonious political relations and reduced tensions between nations. The GATT was founded on the principles of non-discrimination and multilateralism in international trade. Non-discrimination was expressed through unconditional most-favored-nation status for all contracting parties. By this convention, if tariffs on imports from one country were lowered, the tariff on all imports of the same goods from other GATT members must also be reduced.” Encyclopedia of American Foreign Policy; https://www.americanforeignrelations.com/O-W/Treaties-Post-world-war-ii-collective-trade-agreements.html
GATT was ensivasged to be an on-going forum for trade negotiations These were called “rounds”:
“GATT sponsored a series of multinational trade negotiations (called rounds) to progressively lower tariffs and eliminate unfair trade practices.”
Encyclopedia of American Foreign Policy; https://www.americanforeignrelations.com/O-W/Treaties-Post-world-war-ii-collective-trade-agreements.html
It was intended to be moved into the International Trade Organisation (ITO). But this was not fully accepted by the USA who sabotaged it as we shall see:
“At Bretton Woods, New Hampshire, where forty-four nations met from 1 July to 22 July 1944 and created the International Monetary Fund (IMF) to oversee the world’s monetary and exchange-rate systems. The Bretton Woods Conference also established the World Bank to rebuild Western Europe utilizing Marshall Plan funds. . . In 1946 the first session of the Preparatory Committee of the UN Conference on Trade and Employment created the General Agreement on Trade and Tariffs (GATT), to which the United States became a party. The trade rules in the GATT were part of the International Trade Organization (ITO) agreed to in the Havana Charter in 1948. Interestingly, because the rules governing world trade set out in the GATT were so ambiguous, flexible, and loosely framed, Congress refused to ratify U.S. membership in the International Trade Organization. So the United States joined through an executive agreement, using power given to the president under the Reciprocal Trade Agreements Act of 1934. Congress has never recognized the GATT, but in the Trade Expansion Act of 1962, it extended the power given to the president in the 1934 act to negotiate tariff-cutting agreements.”
Encyclopedia of American Foreign Policy; “Post–world war II collective trade agreements”; https://www.americanforeignrelations.com/O-W/Treaties-Post-world-war-ii-collective-trade-agreements.html
Obviously as far as trade is concerned, the USA was determined to usurp the British “trading preferences” – known as “Imperial Preference” – across British colonies. But temporarily – the USA had to give way as the British fiercely resisted:
“Imperial preference was the largest discriminatory tariff system in the world, and it had long been at odds with the U.S. commitment to non-discrimination in trade. Imperial preference was also seen as a symbol of the British Empire, which had no durable place in the American conception of the postwar world. Will Clayton, the assistant undersecretary of state for economic affairs who led the American delegation to Geneva, was intent on dismantling the preferential system. British officials, however, were avidly committed to the preferences as one of the last remaining bonds of the Commonwealth. . . Despite Clayton’s standing and influence on international trade policy, his advice went unheeded. In light of growing antagonism with the Soviet Union, Truman and other senior advisers did not believe that the United States could allow a split with Britain over imperial preference. The president instructed the U.S. delegation to finalize a trade agreement with the British even though the imperial preference system was largely intact.”
Francine McKenzie, “GATT and the Cold War: Accession Debates, Institutional Development, and the Western Alliance,1947–1959”; Journal of Cold War Studies, Volume 10, Number 3, Summer 2008, pp.78-109
The USA having launched the trade discussions – then effectively inserted poison pills into the GATT as regards agriculture. This was objected to very quickly by the Australian wool merchants:
“The U.S. government launched negotiations on both the ITO and the GATT in Geneva on April 10, 1947. American negotiators achieved much of what they wanted in the Geneva draft of the ITO. The United States was able to minimize discrimination by countries with balance-of-payments problems and limit recourse to quantitative restrictions (import quotas) for economic development purposes. Despite this progress, the draft charter left many issues unresolved.
For example, the Geneva negotiations did not clarify whether . . . whether the United States should be allowed to continue its price supports and export subsidies for certain agricultural products. . . Although agriculture had not escaped the attention of the postwar planners, the Food and Agricultural Organization, established on October 16, 1945, had not been able to prevent the introduction of some creative methods of protecting U.S. agricultural interests. For example, the U.S. government guaranteed parity prices for wool and other agricultural products until December 31, 1949, to avoid economic dislocation after the war. These conflicting policy objectives resonated beyond American borders.” Aaronson, Susan Ariel. Trade and the American Dream : A Social History of Postwar Trade Policy, University Press of Kentucky, 1996; p. 80-81
Then having however signed it, the USA used GATT as a weapon in the ‘Cold War’ against the USSR and the emerging People’s Democracies:
“The subsequent American attraction to GATT as a forum in which to wage the Cold War is not surprising. Security and prosperity went hand in hand. The values embedded in liberal trade policies were bedrock principles of capitalism. Freer trade, by making national economies more specialized and efficient through access to resources and markets, would make capitalism, in its many variations, stronger globally.“
McKenzie F Ibid; Ibid
But the plan was supposedly originally, to make the GATT into a wider-ranging agreement of the ITO. This was now sabotaged by the USA, at a crucial negotiation in Havana in 1948. It was led by a very strong USA protectionist lobby:
“the ITO’s architects (from the USA – Ed) did include two known protectionists in the delegation… But the protectionists did not become converts to the ITO’s cause. One vociferous opponent, Elvin H. Kilheffer, believed he was sent to Havana as window dressing. . . Business representatives John Abbink, Elvin Kilheffer, and H.W. Balgooyen agreed . . . Kilheffer had long been an advocate of protection for his employer, Du Pont. . . In discussions with the British delegation to the ITO Conference in January 1948, “Clayton admitted very frankly that he found considerable difficulty in getting United States authorities at Washington to take any… interest in the Charter, their attention being … entirely devoted to Marshall Aid.” Aaronson, Susan Ariel. Trade and the American Dream: A Social History of Postwar Trade Policy, University Press of Kentucky, 1996; p.88; 90; 94
This was likely as a result of an awareness that the Marshall Plan was achieving the USA penetration of European markets much more easily – and without any reciprocal binding on the USA. The USA therefore proceeded to ensure that it would not sign the ITO:
“As a result of the failure to push for hearings on the ITO, some of America’s trading partners began to question the U.S. commitment to multilateral trade liberalization. State Department officials were forced to reassure other ITO nations that the ITO and the GATT remained central to the administration’s foreign policies. But many foreign diplomats were not convinced, because the United States seemed perfectly willing to abandon freer trade policies when it seemed politically expedient.”
Aaronson, Susan Ariel. “Trade and the American Dream”; Ibid; 1996; p. 114; 124
In December 1950, still beset with the anti-Communist McCarthy allegations, the WTO idea was dropped finally by the USA Presidency and all leaders.
The USA did join with the successor to the ITO, on 1 January 1995 – the World Trade Organization (WTO). This was established to continue with the GATT umbrella treaty:
“At the Uruguay Round (1986–1994), in which 117 countries participated, the GATT agreement was extended to include such areas as services, patents, trademarks, copyright, and, most importantly, agriculture. At its final meeting (held in Marrakesh, Morocco, on 7 April 1994), the Uruguay Round also created the World Trade Organization, which, from 1 January 1995, would take over the administrative functions formerly conducted by GATT. Congress legislated to implement the agreement on 7 December 1994.”
https://www.americanforeignrelations.com/O-W/Treaties-Post-world-war-ii-collective-trade-agreements.html
By 2024 the USA had signed agreements with “165 other countries” amounting to “98% of world trade” – according to the right-wing Cato Institute think tank:
“The WTO, a multilateral agreement with 165 other countries that covers 98 percent of world trade. The United States is also party to narrower bilateral investment treaties with about 40 other nations that protect American investment assets abroad.”
August 27, 2024; Cato Institute; at https://www.cato.org/publications/how-trade-agreements-have-enhanced-freedom-prosperity-americans
After the so-called Kennedy Round held in Genva in 1964 and 1967 (Wikipedia) major trade changes took place.
These essentially removed about 50% of the world tariffs, and reduced so-called ‘non-tariff barriers’; and also imposed bans on ‘dumping’. But much criticism of the WTO ensued in the USA.
5. The USA Return to a more overt Protectionism
Shortly after between 1981 to 1989, USA President Ronald Reagan (Presidential terms between1981-1989) began to unilaterally reject elements of GATT, and reverted to a 1974 Trade act:
“Under President Reagan, the United States adopted protectionist measures. It attempted to stem the hemorrhage of its traditional areas of comparative advantage through “managed” trade and ending European subsidies on agriculture. When members of GATT resisted, Washington reverted to a unilateral policy—falling back on Section 301 of the 1974 Trade Act, which allowed for more effective (punitive) measures on goods entering the United States. The United States also entered bilateral arrangements with Canada.”
https://www.americanforeignrelations.com/O-W/Treaties-Post-world-war-ii-collective-trade-agreements.html
While often presented as a pro-Free trader, in reality Reagan was quite the opposite. Even the right-wing Cato Institute carries the view that he was far from being a ‘Free trader”:
“President Reagan imposed a 100% tariff on selected Japanese electronics in 1987, he and the press gave the impression that this was an act of desperation . . . Ronald Reagan by his actions has become the most protectionist president since Herbert Hoover, the heavyweight champion of protectionists. . . the rhetorical inconsistencies are bewildering. President Reagan … during his 1980 campaign. . . spoke about the problems of the American auto industry, saying Japan is part of the problem. That is where government can be legitimately involved. . . to convince the Japanese. . . that deluge of cars must be slowed.“
Sheldon L.Richman, “Cato Institute Policy Analysis No.107, ‘The Reagan Record on Trade: Rhetoric vs Reality”; Cato Institute; May 30, 1988.
In his speech on the ‘Trade and tariff Act’ of 1984 Reagan said:
“With regard to our steel industry, this bill gives the President new authority to enforce agreements we may enter into with our trading partners as part of the steel policy that I announced on September 18th, 1984. This legislation will enable us to enforce steel export restraints, guard against unfair import surges into the American market, and help keep the United States from becoming the world’s steel dump. And that means that we’ll be better able to help our steelworkers get the fair shake they’ve always deserved. I must add that while I support the act’s emphasis on the need for reinvestment in our steel industry, it is the industry, not the government, that must make these investment decisions.”
Remarks on Signing the Trade and Tariff Act of 1984”; October 30, 1984
Reagan’s Secretary of Commerce, Baldridge threatened South Korea with closing the USA door to any exports. Trade Representative Yeutter did the same to Japan on computer memory chips and semicionductors – saying:
“We had no choice but to retalitate against Japanese semiconductor products because Japan refused to open its marker and continued to dump semiconductor chips in third-country markets.. we (cannot) tolerate … a continuing refusal to open markets.”
Richmond; Cato Policy Analysis no. 107 Ibid.
Reagan added while imposing stiff tariffs on Japan:
“The health and vitality of the US semiconductor industry are essential to America’s future competitiveness, we cannot allow it to be jeopardized by unfair trading practices.” Richman Cato Policy Analysis no. 107 Ibid
This was accompanied by a ange of other tariffs and protectionist manouevres. From autos; to sugar; to motorbikes to favour Harley Davidsons; to textiles; to steel imports; to Canadian lumber and cedar shingles; removing “3rd world” countries from duty-free import programmes; machine tools; roller bearings; forklift trucks; colour picture tubes; “beefed up the Export-Import Bank, an institution dedicated to promoting the exports of a handful of large companies at the expense of everyone else”; clothespins – all prompting:
“Milton Friedman to write that the Reagan administration “has been making Smoot-Hawley look positively benign.” Richman Ibid.
This increasingly led to trade disruptions including across the North American continent. It is ultimately no surprise, that in fact Reagan changed tack and focused on North American “Free Trade” (NAFTA).
While NAFTA was signed ceremoniously by President Clinton in 1994, it was Ronald Reagan who first proposed a free trade agreement between the U.S. and Mexico in his 1980 presidential campaign.
“As the twentieth century came to an end the world economy was in turmoil. Macroeconomic failures across countries had created staggering levels of unemployment in rich and poor countries alike. American protectionist practices, along with the programs dictated by the International Monetary Fund and World Bank, helped increase the gap between rich and poor countries. Mexico, one of the countries whose economy was most at risk because of foreign-owed debt—primarily to American-owned banks—had signed the GATT in 1986, and in response to International Monetary Fund demands, began to restructure its economy along lines acceptable to U.S. economic and financial interests. These requirements included elimination of fetters on the free market, privatizing areas of the economy that were previously under public control, and eliminating restrictions on foreign investment. Mexico set in motion a series of tariff-reduction and other economic liberalization measures. It also indicated that it would be interested in securing a “Canadian” deal with the United States.”
https://www.americanforeignrelations.com/O-W/Treaties-Post-world-war-ii-collective-trade-agreements.html
6. North American “Free Trade” Agreement (NAFTA)
As we saw President Reagan had initiated the NAFTA agreement. This effectively was an attempt to close off the whole continent of North America – in many aspects of manufacture (but especially in automobiles) – to all except the countries of USA Canada and Mexico. It did this by demanding that goods had to have a ‘Made in North America’ origin:
“The United States, once the defender of multilateralism and free trade, sought regional solutions to its economic woes. One such initiative was the North American Free Trade Agreement (NAFTA), signed with Canada and Mexico. Designed to create a free trade zone in the North American continent, it came into effect on 1 January 1994. NAFTA was an executive agreement reached on 12 August 1992. . . In its own words, one of the main objectives of NAFTA was “the elimination of tariffs between Canada, Mexico, and the United States on ‘qualifying’ goods by the year 1998 for originating goods from Canada and for originating goods from Mexico by the year 2008.”
https://www.americanforeignrelations.com/O-W/Treaties-Post-world-war-ii-collective-trade-agreements.html
The USA knew what it was punting for:
“The U.S. International Trade Commission estimated that American companies stood to gain $61 billion a year from the Third World if U.S. protectionist demands were satisfied by NAFTA.”
https://www.americanforeignrelations.com/O-W/Treaties-Post-world-war-ii-collective-trade-agreements.html
A case against NAFTA was made by the Canadian nationalists – which formed the ‘Council of Candians’ – and whose public face was often Maud Barlow (Canadian Encyclopedia ; and Wikipedia ).
In a ‘Parcel of Rogues – How Free Trade is Failing Canada’ (Toronto 1990), Barlow made a strong pitch against the imminent NAFTA. The Council of Canadians was fighting a losing battle against the dominant USA. However, they won some interim ground retaining some shreds of Canadian ‘independence’ at the cost of losing considerable industrial power.
Essentially the Canadian and Mexican nationalists, criticised NAFTA on the following grounds:
“Critics argued that NAFTA had only a limited relation to free trade. They pointed out that a primary U.S. objective was increased protection for “intellectual property,” including software, patents for seeds and drugs, and so on. Such measures were designed to ensure that U.S.-based corporations controlled the technology of the future, including biotechnology, which, it was hoped, would allow protected private enterprise to control health, agriculture, and the means of life generally, locking the poor into dependence and hopelessness.” https://www.americanforeignrelations.com/O-W/Treaties-Post-world-war-ii-collective-trade-agreements.html
By design the USA had insisted upon a complex set of rules that ensured that parts of a final product had to have been made on the North American continent, and moreover that a sizeable chunk of that was on USA soil. Moreover USA banking privileges were prioritised over either Mexican or Canadian banks:
“Opponents further pointed out that NAFTA included intricate “rules of origin” requirements designed to keep foreign competitors out. Moreover, the agreements went far beyond trade. A prime U.S. objective was liberalization of services, which would allow supranational banks to displace domestic competitors and thus eliminate any threat of national economic planning and independent development.” https://www.americanforeignrelations.com/O-W/Treaties-Post-world-war-ii-collective-trade-agreements.html
However a Mexican junior partner status had dividends for the compromising section of the Mexican bourgeoisie:
“Nevertheless, NAFTA provided Mexican exporters with additional market access and helped attract foreign direct investment into Mexico, in services as well as in the industrial export sector. At the end of 1999, Mexico was the eighth largest export economy in the world, with $280 billion in exports. By the end of 2000, Mexico ranked as the fifth largest export economy in the world (up from twenty-sixth at the beginning of the 1990s) with an estimated $300 billion in exports. Between 1993 and 1999, Mexico’s exports to the United States rose a remarkable 160 percent. The U.S. International Trade Commission estimated that American companies stood to gain $61 billion a year from the Third World if U.S. protectionist demands were satisfied by NAFTA.”
https://www.americanforeignrelations.com/O-W/Treaties-Post-world-war-ii-collective-trade-agreements.html
The effects of NAFTA were immensely to the benefit of the USA – and its junior capitalist partners in Canada and Mexico. The tough USA negotiator of NAFTA – Carla Hills had this to say in 2014:
“Today, thanks to NAFTA, North Americans not only sell more things to one another; they also make more things together. . . For every dollar of goods that Canada and Mexico export to the US, there are 25 cents worth of US inputs in the Canadian goods and 40 cents’ worth in the Mexican goods. By way of comparison there are four cents’ worth of US inputs in Chinese goods going to the American market and two cents’ worth of Japanese goods.” Carla A. Hills; “NAFTA’s Economic Upsides: The View From the United States”; Foreign Affairs , January/February 2014, Vol. 93, No. 1, pp. 122-127
The Canadian amounts of a Foreign Direct Investment (FDI) into the USA has been escalating, especially after the renegotiation of the NAFTA deal with the USA in 2016. This can be seen below in Figure 1.
Figure 1: Foreign direct investment (FDI) from NAFTA countries in the United States from 1994 to 2019 (in billion U.S. dollars, on a historical-cost basis); From Statista Accessed 13 March, 2025.
Hence it is true that USA – and Mexican – finance into Canada has “tripled”. But the effect on Canada itself, was really only a furthering bleed of its finances. That bleed had started in serious manner in 1989. It has been deemed by some as “the most consequential aspect for Canada” in the the most consequential aspect for Canada:
“Canada saw strong gains in cross-border investment in the NAFTA era: Since 1993, U.S. and Mexican investments in Canada have tripled. U.S. investment, which accounts for more than half of Canada’s FDI stock, grew from [PDF] $70 billion in 1993 to more than $368 billion in 2013.
However, the most consequential aspect for Canada—opening its economy to the United States, by far Canada’s largest trading partner—predated NAFTA, with 1989 entry into force of the Canada-U.S. Free Trade Agreement (CUSFTA). Overall Canada-U.S. trade increased rapidly in the wake of Canada’s trade liberalization. Post-NAFTA, Canadian exports to the United States grew from [PDF] $110 billion to $346 billion; imports from the United States grew by almost the same amount.
Agriculture, in particular, saw a boost. Canada is the leading importer of U.S. agricultural products, and Canadian agricultural trade with the United States has more than tripled since 1994, as did Canada’s total agriculture exports to NAFTA partners.
Neither the worst fears of Canada’s trade opponents—that opening to trade would gut the country’s manufacturing sector—nor the highest hopes of NAFTA’s advocates—that it would spark a rapid increase in productivity—came to pass. Canadian manufacturing employment held steady, but the productivity gap between the Canadian and U.S. economies wasn’t closed: by 2017, Canada’s labor productivity remained at 72 percent [PDF] of U.S. levels. Overall, Canada became more dependent on trade with the United States, relying on its southern neighbor for 75 percent of its exports.” (our emphasis)
Andrew Chatzky James McBride, Mohammed Aly Sergie; “ NAFTA and the USMCA: Weighing the Impact of North American Trade”; 1 July 2020;
7. The Obama ‘Pivot to China’ in the Trans Pacific Pact TPP, and 2015 -2018 re-negotiations over NAFTA
The Trans Pacific Pact did represent a slight change of gear for the USA capitalists. They were starting to get more disturbed about the Chinese rising threat to the USA trade. True the USA state was still very much dominant. But, the Chinese state was making inroads. However there was considerable division in the capitalist class, since some viewed the possible enticements of low-wages in the Pacific basin area, to American industry – as a draw-back:
“Opponents in the United States saw the pact as mostly a giveaway to business, encouraging further export of manufacturing jobs to low-wage nations while limiting competition and encouraging higher prices for pharmaceuticals and other high-value products by spreading American standards for patent protections to other countries.”
Kevin Granville; “What Is TPP? Behind the Trade Deal That Died”; New York Times; January 23, 2017
Indeed the apparent ‘de-industrialisation’ of parts of the USA was a visible and growing problem. We discussed this previously as a major part of Trump’s agenda which was to effect a re-shoring of USA industry, back to the USA. (See ) Trump campaigned against the TPP, as indeed did others – like. . . Hilary Clinton and Bernie Sanders:
“TPP was flatlining politically well before Trump pulled the plug: Bernie Sanders had campaigned against it with rhetoric similar to Trump’s, and Hillary Clinton, who had called it “the gold standard” as Obama’s secretary of state, flipped against it when she saw it becoming toxic in her Democratic primary against Sanders.“
Michael Grunwald; “The Trade Deal We Just Threw Overboard – Donald Trump wants to rewrite NAFTA, but someone else already did. Here’s how it went down”; Politico March/April 2017;
Trump had also made attacks on NAFTA as being too generous to the Canadian bourgeoisie. Indeed, Obama was already re-negotiating that and tightening the screws. Trump pulled out:
“President Barack Obama’s negotiators spent more than three years haggling and battling to update and upgrade the 1994 deal, and they eventually got a lot of what they wanted. Canada reluctantly agreed to give American farmers modest but unprecedented access to its tightly protected dairy industry; Mexico grudgingly agreed to labor reforms with more bite than NAFTA’s toothless union protections. The new deal opened up service sectors like insurance, accounting and express delivery where the United States tends to excel, along with e-commerce and other digital industries that didn’t exist when NAFTA was born. The United States also secured new restrictions on government-owned businesses, new protections for intellectual property and new safeguards for the environment.
But none of those hard-won concessions are going into effect. That’s because the Obama team negotiated all of them as part of the Trans-Pacific Partnership, the 5,500-page Asia-oriented trade agreement among the three NAFTA nations and nine other Pacific Rim countries. TPP was at the heart of Obama’s strategic “pivot to Asia.” But Trump saw it as another fleecing of America, and with great fanfare he yanked the United States out of TPP during his first week in office, before Congress could even vote on whether the deal should take effect. That means its upgrades to NAFTA—regarding dairy, labor and everything else Mexico and Canada agreed to—are probably moot.”
Michael Grunwald; “The Trade Deal We Just Threw Overboard ” Ibid.
Instead, Trump’s team re-negotiated NAFTA – with an even tighter press on Canada:
“Trump instead made good on his campaign promise to renegotiate NAFTA. He used tariffs as bargaining leverage throughout the process, applying import tariffs on steel and aluminum in early 2018 and threatening to do the same with automobiles. Trump’s demands included more access to Canada’s highly protected dairy market, better labor protections, dispute resolution reform, and new rules for digital commerce.
In late 2019, the Trump administration won support from congressional Democrats for the USMCA after agreeing to incorporate stronger labor enforcement. In the updated pact, the parties settled on a number of changes: Rules of origin for the auto industry were tightened, requiring 75 percent of each vehicle to originate in the member countries, up from 62.5 percent; and new labor stipulations were added, requiring 40 percent of each vehicle to come from factories paying at least $16 per hour. A proposed expansion of intellectual property protections for U.S. pharmaceuticals—long a red line for U.S. trade negotiators—was sacrificed. The USMCA also significantly scales back the controversial investor-state dispute settlement mechanism, eliminating it entirely with Canada and limiting it to certain sectors with Mexico, including oil and gas and telecommunications.
As part of the deal, Canada agreed to allow more access to its dairy market and won several concessions in return. The USMCA will keep the Chapter 19 dispute panel, which Canada relies on to shield it from U.S. trade remedies. It also avoided a proposed five-year sunset clause, instead using a sixteen-year time frame with a review after six years.”
Andrew Chatzky James McBride, Mohammed Aly Sergie; “ NAFTA and the USMCA: Weighing the Impact of North American Trade”;
By as recently as 2019 a new twist was evident. The ‘rules of origin’ in the NAFTA Agreement, had led to a new development. Many leading automakers – whether their parent company was Germany, Japan or Korea – had figured out a way forward. They would establish branch plants in either the USA, Canada, or Mexico. They took advantage often of the lower costs of production in Mexico for example.
“Charles Evans, president and CEO, Federal Reserve Bank of Chicago. . . explained that since the North American Free Trade Agreement (NAFTA) went into effect in 1994, auto manufacturers have integrated their operations across North America (defined here as Canada, Mexico, and the U.S.). In 2018, 16.9 million light vehicles (cars and light trucks) were produced in North America. And the majority of them were sold within the region. The integration of auto production across the region extends to automakers’ supply chains, he pointed out. Typically, parts and subassemblies cross international borders several times before they reach the vehicle assembly line. According to recent research by Alonso de Gortari, 38% of the value added in cars produced in Mexico and then sold in the U.S. originates from the U.S.”
Thomas H. Klier; “The Impact of Trade on the North American Auto Industry”; Federal Reserve of Chicago; Chicago Fed Letter, No. 427, 2019; Chicago Fed
The result by 2019 was dramatic:
“Today 14 companies produce vehicles in North America—and all but two of them are headquartered overseas, said Evans. Five of these companies started producing vehicles in the U.S. after NAFTA entered into force in 1994. Nine of them operate production plants in more than one NAFTA country, taking advantage of the fact that North America is in effect a single integrated economic region.”
Thomas H. Klier; “The Impact of Trade on the North American Auto Industry”; Chicago Fed Letter, 2019; Ibid
Of the top 31 auto manufacturer plants inside the USA – there are a total of 16 manufacturers – of whom 11 are based outside of North America; and one (Stellantis) is joint Italian-American). (Top 31 manufacturers)
A variant of this theme is that exports to the USA can be made to either Mexico or to Canda. Most likely Mexico – and then be re-shipped to the USA. China in especial has been utilising this route:
“Officials in Beijing are increasingly worried that President Trump’s tariffs on Mexico may be the start of a broad campaign to force developing countries around the world to choose between trade with the United States or with China.
Ever since Mr. Trump imposed extensive tariffs on goods from China during his first term, companies have been investing heavily in countries like Mexico, Vietnam and Thailand to assemble Chinese components into goods for shipment to the United States. Doing final assembly in these countries offered a back door to the U.S. market regardless of trade frictions between Washington and Beijing.
China’s trade surplus with the United States has shrunk by almost a third since 2018. But Chinese exports to developing countries have skyrocketed. China now sells 11 times as much to Mexico as China buys from it. Those sales include Chinese auto parts assembled in Mexico in cars destined for dealerships in the United States.
The concern now in Beijing is that Washington’s pressure could force Mexico to close its market to Chinese goods in exchange for a reprieve from American tariffs on trade with Mexico. At stake for Mexico, among other things, are the jobs created by its abundant trade with the United States. . .
Especially worrisome for Chinese officials is an obscure loophole that was baked into the World Trade Organization’s rules when the Geneva-based organization was created in 1995. The loophole allows Mexico — and potentially dozens of low-income and middle-income countries — to legally raise tariffs steeply and suddenly on Chinese goods, while Beijing would have no right to retaliate. . .
Chinese officials alluded to their nervousness about maintaining access to developing markets during the annual session of China’s legislature. . . Wang Wentao, the commerce minister, noted at a news conference that slightly more than half of China’s international trade was with countries belonging to the Belt and Road Initiative, China’s outreach to less affluent countries across Asia, Eastern Europe, Africa and Latin America.”
Keith Bradsher; “Why China Is Worried About Trump’s Tariffs on Mexico”: NYT 14 March 2025.
I doubt that the case needs to be made that Democratic President Biden’s approach to tariffs – at least with regards to China were very different. However a small snippet:
“The White House is currently finalising the details of President Joe Biden’s latest exercise in economic sparring with Beijing: a planned 25 per cent tariff on imports of the Chinese cranes which dominate the container-unloading business at American ports.”
Sam Fleming, Demetri Sevastopulo, Claire Jones; “How national security has transformed economic policy”; FT 4 September 2024.
8. Why is Trump now Attacking on Tariffs?
The question then is why is Trump attacking the NAFTA Agreements, and Canada and Mexico so heavily now?
It seems clear that the NAFTA agreement in its present form – shows Trump’s advisers a way forward. Mainly German, South Korean and Japanese auto makers – have taken the expedient of simply building their plants in the USA.
As a minimum, the USA capitalists represented by Trump want more of that – rather than having the plants in either Mexico or Canada. The recent enticements to European high tech firms are only part of this strategy – and were enacted under Biden’s administration as the ‘Inflation Reduction Act and the Chips And Science Act’. It had rapid effects:
“German companies announced a record $15.7bn of capital commitments in US projects last year, up from $8.2bn a year earlier, according to data compiled by fDi Markets, a subsidiary of the Financial Times, dwarfing the $5.9bn pledged in China. The amount heading for the US made up about 15 per cent of total commitments in 2023 in either greenfield or expansion projects overseas, compared with 6 per cent the previous year. The Investment boom covers the first year since the Biden administration passed the Inflation Reduction Act and the Chips And Science Act, which offer more than $400bn in tax credits, loans and subsidies with the aim of rebuilding US manufacturing and accelerating the energy transition. German companies announced 185 capital projects in the US in 2023, of which 73 were in the manufacturing sector. The largest project was a $2bn Investment by Volkswagen’s Scout Motors electric vehicle subsidiary In Columbia, South Carolina. Some types of foreign investment, such as M&A and other forms of equity investment, are not tracked by fDi Markets. Senior executives at BASF and Siemens Energy — two of Germany’s largest companies — said a combination of pragmatic US government industrial policies, a strong long-term market outlook and increasing focus on supply chains was driving US investment. “We see this huge investment potential with the new buildout of energy infrastructure in the US,” said Tim Holt, an executive board member of Siemens Energy, which this month announced plans to build a $150mn power transformer plant in Charlotte, North Carolina. “
Jamie Smyth & Patricia Nilsson; “German companies flock to US with record pledges of capital investment”; Financial Times (FT) Feb 19 2024.
Figure 3 (Same source) makes this trend clear – up to 2023 at any rate… After the Munich Security Conference things may well have changed!
But Trump means to accelerate this trend, although his attack on the European Union (EU) may halt this inward investment into the USA. We will deal with the attacks on the EU in relation to Ukarine separately.
Clearly for the USA capitalists, Biden’s efforts have not been adequate enough. Figure 3 makes clear the major countries that are being targeted now under Trump.
Figure 3: 2023 Figures of Ranking of the top trading partners of the United States for trade goods by import value (in billion U.S. dollars) – Statista – Accessed 13 March
Thus as is clear, it is not just Canada and Mexico that are being targeted. As noted, the European Union will be discussed separately in the next article.
However, we note here that India was quick to cave, with Narendra Modi quickly agreeing to drop India’s long-standing tariffs:
“The tariffs India imposes on US goods are higher than America’s, in some cases by a big margin. While the gap for industrial products is 3.3 per cent, for agricultural products it stands at 32.4 percent, according to the Global Trade Research Initiative (GTRI), a New Delhi think-tank.” John Reed, Andres Schipani, Haohsiang Ko; ‘Whatever you charge, I’m charging’: Donald Trump forces India’s hand on tariffs” 11 March, 2025; FT .
We focus a little more on Canada in this piece.
Canada – despite all the nationalistic bluster, is negotating. Premier Ford of Ontario has already withdrawn the threat of Ontario electricity tariffs. Although he did reduce Trump’s “50% tariff rate” by his threat (Aime Williams & Ilya Gridneff; “Donald Trump backs down on 50% steel and aluminium tariffs on Canada”; Financial Times; 12 March, 2025).
Admittedly the play and counter-play is moving very fast.
But can it be expected that the newly elected leader of the Liberal Party – Mark Carney – will resist the USA pressure if he becomes the newly elected Prime Minster of Canada? Carney’s credentials are impeccable. . . as the servant of large business. Previously he led the Bank of Canada, and then the Bank of England. (David Moscrop; “Mark Carney says he’s a pragmatic outsider—but he’s a banker selling yesterday’s failed ideas”; ‘The Breach’; Vancouver; 23 February 2025)
It is very likely – but not guaranteed – that the Liberals will win the new imminent elections. The Conservatives led by Pierre Poilievre are visibly long time pro-USA dependents. It seems unlikely that Canadians will place them in power. The Editorial Board of the Financial Times puts it as follows:
“Some Canadians will conclude that Poilievre, who has espoused a Trump-like faith in cutting taxes and replacing “woke” excesses with “common sense politics”, is best placed to deal with the US president. Carney, by contrast, a Harvard- and Oxford-educated central banker and green investment advocate, seems to be everything Trump dislikes. Yet Carney’s experience of crisis management, as head of Canada’s central bank during the 2008 financial crisis and Britain’s during Brexit, gives him some credibility in handling a trade war that threatens to push his country into a deep recession.”
Editorial Board; “Mark Carney takes on Trump’s America” FT; 10 March 2025.
Trump makes it clear that he considers Canada should become formally annexed to the USA:
“A month since Trump’s return to the White House, Trudeau’s levity has vanished. The annexation threats are “a real thing”, he was caught saying on a hot mic last week as Washington ratcheted up the rhetoric. Trudeau added that Trump had designs on Canada’s mineral wealth. “I think Canada is going to be a very serious contender to be our 51st state,” Trump said on Thursday, referring to Trudeau as “governor”. “They need our protection.” Myles McCormick and Ilya Gridneff; Financial Times “Is Donald Trump serious about annexing Canada?”; 16 February 2025; and:
Avi Lewis calls for anti-monopoly actions (“Trump’s economic war is ours to win—if we ditch the corporate playbook and think big”; The Breach Vancouver; Mar 7 2025).
Meanwhile in Quebec Bill 89 is being adopted which further eviscerates rights of workers:
“Under Bill 89, the Quebec government is giving itself the power to order the Tribunal administratif du travail (TAT—Quebec Labour Court) to determine whether services ensuring the“well-being of the population” should be maintained during a strike or lockout. . . Hitherto, so-called “essential service” restrictions on the right to strike have been limited to ensuring the“health and safety” of the public. This has resulted in sweeping restrictions on many workers’ right to strike, especially in the healthcare sector—restrictions the TAT has rigorously enforced. But now the CAQ government is expanding the definition of “essential services” to make it a veritable catch-all.” Hugo Maltais; “Quebec government moves to eviscerate the right to strike”; World Socialist Web Site; 13 March 2025.
As Sam Gindin formerly of the Canadian Auto Workers, puts it:
“Substantive sovereignty – the capacity to make democratic decision with respect to economic matters without limits imposed by a foreign power – demands initiating a project of sober delinking from the US economy and capital. We should come to this with no illusions about how difficult this will be. Our over-dependence on the most powerful country in the world guarantees that breaking slowly away, even partially, will involve uncertainties, disruptions, and sacrifices.” Sam Gindin, “Trump’s Auto-Tariffs: From Formal Sovereignty to Substantive Sovereignty”: ‘The Bullet” The Socialist Project, Toronto; March 12, 2025
Conclusions to this part of the larger review of What is Trump up to?
As noted before the stop-start-stop Trump intimidation is deliberate. Up to March 11th, they were summarised by NY Times writers as follows:
“Tracking Trump’s First 100 Days:
March 6 Suspended many of the tariffs imposed on Canada and Mexico ›
March 5 Paused tariffs on cars from Canada and Mexico for a month ›
March 5 Accused Prime Minister Justin Trudeau of Canada of imposing tariffs on
the U.S. “to stay in power” ›
March 4 Imposed 25 percent tariffs on all imports from Canada and Mexico and
a 10 percent tariff on all imports from China, sending shockwaves
through the economy ›
March 1 Ordered an increase in U.S. lumber production.” Ben Casselman, Colby Smith; “Trump Tariffs and Trade Wars Leave Investors, Once Optimistic, Feeling Apprehensive “; New York Times; March 11, 2003 2025.
Trump and the capitalist class are aiming now at more firmly incorporating the services and manufacturing of both Canada and Mexico. It is unlikely in our view that they want in reality – to formally engulf Canada. It would create too many tensions with a Canadian working class. All they want is firmer subordination – and the mineral and oil and gas. In addition they want in all likelihood, better access to the Arctic as a ring to encircle the globe.
‘As far as the GDP of Canada goes, it has already been faltering as far as any comparison to the USA is concerned (Figure 4.)
At: Country Economy
What are the relevant banners and slogans for the Canadian working class?
o It seems clear a stand for Canadian nationhood – as opposed to “becoming the 51st State” – is in the interests of the Canadian working class. However the working class has to become aware that Canadian nationalism cannot solve its problems, nor claim the future.
o However the current parties do not support the goals of the Canadian working class in moving to socialism – neither the Liberals nor the Conservative Party are anything more than the shell for the Canadian bourgeois junior partners of the USA imperialists; and the New Democratic Party (NDP) is simply a social-reformist party that has now for many years supported the previous Trudeau Liberal Government in launching sustained attacks on the Canadian workers and petit-bourgeoisie.
Only a Marxist-Leninist party can move through this fog of nationalism.
We continue to analyse the 2nd Trump administration, next will be the European Union and Ukraine – and with it, of course NATO.
