What is going on with Trump’s tariffs?

Jonny Jones explains why Trump is imposing tariffs and assesses whether they will achieve what he wants.

At a rally just after his inauguration, Donald Trump described ‘tariffs’ as ‘the most beautiful word to me in the dictionary. Because tariffs are going to make us rich as hell.’ Then on 2 April, Trump declared the US’s ‘economic independence’ with ‘Liberation Day; announcing sweeping tariffs on imports—ranging from a 10 per cent baseline tariff to 54 per cent on China, later extended to 154 per cent. The shock to the global system was enormous. So what is going on?

Has anything like this happened before?

Tariffs—duties on imports—have a long history, playing different roles depending on context. In the 19th century, they shielded fledgling industries in Germany and the US from British competition. But in the early 20th century, amid growing imperial rivalries, their purpose shifted. As Marxist economist Rudolf Hilferding wrote:

From being a means of defence against the conquest of the domestic market by foreign industries it has become a means for the conquest of foreign markets by domestic industry. What was once a defensive weapon of the weak has become an offensive weapon in the hands of the powerful.

After World War II, tariffs and non-tariff barriers (like quotas and subsidies) became tools for industrial development in East Asia’s ‘developmental states’ and Latin America’s import substitution economies. Japan and West Germany grew into production powerhouses benefitting from US Cold War military spending under its security umbrella.

This changed in the 1970s and 1980s. In 1971 President Nixon unleashed the last major economic shock imposed by the US state, delinking the US dollar from gold, introducing tax cuts, and imposing a 10 per cent tariff. Treasury Secretary John Connally famously told Nixon, ‘All foreigners are out to screw us and it’s our job to screw them first.’

A few years later, US Federal Reserve Chair Paul Volcker raised interest rates to 19 per cent to combat inflation. The result was deep recession and unemployment in the US, and a debt crisis across the developing world, which forced many countries into IMF-led privatisation programs. From the standpoint of US capitalism, it worked. As James Meadway explains:

… with manufacturing in freefall, investment flooded into finance and property, firing up what became the great credit bubble of the 1990s and 2000s. The world economy was reordered around a US that acted as a giant sink for its output—swallowing exports from the rest of the world on seemingly limitless borrowing. China’s extraordinary boom was the flipside of US debt and deindustrialisation.

Since then, neoliberalism and free trade have prevailed over tariffs and outright protectionism—until Trump’s first term, now ramped up in his second.

What is Trump trying to do?

Though Trump’s approach can seem chaotic, there is a strategy behind it. Many of his advisers have serious plans for reasserting US dominance in the global economy.

Trump’s Treasury Secretary, hedge fund manager Scott Bessent, advocates growing the US economy through tax cuts, deregulation, and tariffs—while maintaining the dollar’s reserve currency status. This ‘exorbitant privilege’ lets the US borrow cheaply but also keeps the dollar overvalued, making exports uncompetitive—especially against China, the US’s major rising economic rival.

Bessent has said, ‘We are going to have to have some kind of a grand global economic reordering… I’d like to be a part of it.’ Stephen Miran, chair of the Council of Economic Advisers, outlined this vision in his paper ‘A User’s Guide to Restructuring the Global Trading System’. He proposed steps to tackle dollar overvaluation and shift the burden of the US security umbrella onto allies.

Vice President JD Vance had already warned European powers earlier this year that they would need to cover more of their defence costs on the continent, putting the future of Nato in question and leading to European leaders including Keir Starmer rushing to spend billions on rearmament. Tariffs further this strategy by pressuring US allies to adjust their dollar holdings—lowering the dollar’s value while keeping its reserve status.

Trump is also trying to isolate China. By targeting global supply chains, he wants to draw allies closer while forcing countries like Mexico, Vietnam, and Cambodia to stop acting as conduits for Chinese exports. As Peter Navarro, Trump’s senior trade adviser put it, the US wants assurances that these countries ‘will stop allowing China to evade US tariffs.’

So while Trump’s policies may defy 40 years of neoliberal logic, they reveal a plan to reassert US dominance among allies and rivals alike. His pivot away from multilateralism is dramatic, but it also reveals the obstacles ahead.

Why were the tariffs paused?

‘The best-laid schemes of mice and men, Go oft awry,’ wrote Robert Burns—and so it proved on Liberation Day. Markets panicked over the scale of Trump’s tariffs, prompting large sell-offs. Falling stock prices triggered margin calls on debt-laden investment funds, who suddenly needed to put up more collateral, causing more sell-offs. Typically, US debt is a safe haven in such turmoil, but this time even bonds were being dumped.

With fears of a tariff-induced recession and rising borrowing costs, financial instability loomed. Trump was forced to back down, pausing tariffs on all countries except China. Then, when it became clear that tariffs on China would hit many vital imports, consumer electronics, phones and laptops were excluded—delighting US tech firms.

Though bond markets calmed, volatility remains likely. Trump wants to extend tax cuts, but how will they be funded without tariffs? And while tech companies were temporarily appeased, the national security concerns around China’s development of semiconductors that lie at the heart of Trump’s strategy remain unresolved.

These events show that upending the global economic order may be easy; reshaping it is far more difficult.

What comes next?

In volatile times, many outcomes are possible. In the short term, tariffs will lower living standards worldwide—job losses in supplier countries, inflation in the US and elsewhere.

Trump’s goal of decoupling from China and reindustrialising the US seems unlikely. What kind of reindustrialisation is possible when Chinese wages are 20 per cent of US levels? Only the highest-value industries could feasibly return to US soil—and even then, pressures for automation and attacks on workers’ rights would dominate. Manufacturing jobs in the US aren’t necessarily good jobs. Better conditions require strong unions and effective worker organisation—something Trump opposes.

Can Trump succeed? Financial markets already halted this phase of his plans. And as the economic historian Adam Tooze noted, US capital isn’t demanding the changes Trump is pushing:

Detroit’s ‘Big Three’ were not clamoring for their trade relations with Mexico and Canada to be disrupted. America’s manufacturers were not asking for the price of their imported components and raw materials to be hiked, or their export chances to be jeopardized. American agro business depends heavily on export markets. Wall Street has no interest in abandoning the dollar’s exorbitant privilege. America’s globalization was not the figment of some liberal globalist imagination. It was shaped very much to the tastes and in the interests of American business.

There is no major social base for Trump’s plan. Neil Davidson once wrote that neoliberalism fostered short-termism rooted in the profit motives of financial capital. Trump is discovering that a long-term strategy for US dominance clashes with these tendencies—and without a strong domestic base integrated by the state, he faces huge challenges. That’s why his far-right, racist, and transphobic agenda is so central: it’s an attempt to forge a coalition he can depend on.

This doesn’t mean tariffs are gone. China and the US continue to escalate their retaliatory measures. The US has reopened negotiations with several countries. Meanwhile, Keir Starmer has courted Trump for months—with little to show for it. A proposed US trade deal with Britain, tantalisingly dangled by JD Vance, offers little cause for celebration. The US will likely push to weaken already-low safety standards on food and consumer goods. 

Back in 1845, Friedrich Engels wrote that socialists should support neither free trade nor tariffs, but critique both from a communist standpoint. We oppose Trump’s tariffs not for harming ‘our’ national economy but because they threaten inflation, job losses, and broader attacks that will hurt workers and the oppressed globally.

Our response need not be to imagine ourselves as state leaders, asking ‘what would we do in their shoes?’, but to build opposition in the here and now to the effects of Trump’s policy and Starmer’s eagerness to make workers pay for it. Against rising reactionary economic nationalism, our politics must be internationalist, liberatory, and rooted in resistance.