By John Ross
Trump is attempting to impose an international trade system arbitrarily dictated by the U.S.
The tariffs adopted by the U.S. to meet Trump’s August 1 deadline fully confirm just how dangerous the new trade system Trump is attempting to impose on the world is for all countries, both in the Global South and the Global North.
Beyond even arbitrary economic decisions, Trump’s actions make it clear that under this system, unilateral U.S. tariff dictats will be used against countries that adopt political policies the U.S. opposes. Thus:
- Trump has imposed a 50% tariff on Brazil because it is trying Bolsonaro for attempting a coup d’état.
- A 25% tariff has been imposed on India after Trump criticized it for importing Russian oil.
- A 35% tariff has been imposed on Canada after Trump stated that reaching a trade deal was difficult because Canada had decided to recognise a Palestinian state.
Furthermore, as Trump has confirmed through his frequent changes in rates, he intends to introduce a system in which the U.S. can alter its policy at any time to promote its interests against those of any other country.
The WTO system was very far from perfect; it had a systematic bias against developing countries. However, the world trade system that Trump is attempting to introduce eliminates even the elements of multilateralism and the rules established in WTO agreements, making it a far more dangerous system for every country.
It is also clear that if the major economies had decided to act jointly, Trump could not have imposed this new system. The U.S. only accounts for 11% of world merchandise trade. If other countries, representing 89% of world merchandise trade, had united against Trump, they could have easily defeated his attempt to reorganise world trade. But Trump, rightly, calculated that the leadership of most Global North states, such as Britain and the EU, would capitulate to him and act even against both their national interests and the interests of their peoples.
The EU’s capitulation to Trump
In particular, the EU-U.S. trade deal represents another severe blow inflicted by the U.S. on Europe’s economy and its people. This follows on from the vast economic cost of the Ukraine war caused by NATO expansion, the U.S. blowing up of the Nord Stream pipeline, the forcing of the EU to buy expensive U.S. LNG to replace much cheaper Russian gas, and the enormous cost to Europe of rearmament in line with the U.S. demands to increase military spending to 3.5% of GDP, among other blows.
The cumulative effect of these blows is that Europe’s economy has been deeply damaged, and its people have suffered a severe economic assault.
The new agreement’s key terms all damage Europe’s economy and its people.
- The 15% tariff imposed by the U.S. on imports from the EU, compared to the current average of 4.8%, has not been met with an equivalent tariff increase by the EU on U.S. goods. This 15% tariff will exert downward pressure on EU exports to the U.S., which in turn will negatively affect EU production and employment.
- The EU agreed to purchase $750 billion worth of U.S. LNG over three years. There is doubt about the EU’s physical capacity to import that volume of LNG within this period. However, this commitment will lead to further investment aimed at moving closer to the target. Consequently, the EU will be further locked into expensive U.S. LNG rather than the significantly cheaper Russian gas — achieving this was one of the U.S.’s key objectives in Europe.
- The EU agreed to purchase “hundreds of billions of dollars” worth of U.S. military equipment, meaning that reductions in social spending in Europe to finance rearmament will be paid to U.S. companies.
Why the EU capitulated
As U.S. and European commentators analysed this deal was a capitulation by the EU and a huge victory for Trump. France’s Prime Minister François Bayrou stated that the bloc had “resigned itself into submission”. Germany’s largest industry association, the Federation of German Industries, warned that the agreement was “an inadequate compromise” that would harm the country’s “export-oriented industry”– although German Chancellor Merz and Italian Prime Minister Meloni welcomed the deal and had played key roles in pushing the EU to make this agreement. Ian Bremmer of the Eurasia group, the leading U.S. public geopolitical analysis firm, described it as the “biggest win of second trump administration to date
The Financial Times conducted a detailed analysis of the process and forces leading to the deal: “In the face of Donald Trump’s trade blitz, the EU began its path to capitulation on April 10… On April 10 it suspended its retaliatory tariffs… [r]ather than join Canada and China with instant retaliation… Under the framework deal struck by European Commission president Ursula von der Leyen and Trump… the EU has swallowed a broad-based “baseline” US tariff of 15 per cent.…
“could the EU, the world’s largest trading bloc and supposedly an economic heavyweight, have extracted better terms had it not pulled its punches early on?
“’He’s the bully in the schoolyard and we didn’t join others in standing up to him,’ said one diplomat. ‘Those who don’t hang together get hanged separately.’
“Georg Riekeles, a former commission official who helped negotiate the UK’s exit from the bloc, said the EU’s most recent threat to apply €93bn of retaliatory tariffs against US goods came far too late.
“’With the benefit of hindsight, the EU would have been better off answering the US vigorously in April in a one-two combo with China’s retaliation against the US tariff hikes, which left markets and Trump reeling,’ said Riekeles…
“There is no hiding the fact the EU was rolled over by…Trump… said one ambassador”
A decisive factor in the EU’s capitulation was its support for NATO. As the Financial Times noted: “Europe’s dependency on America’s security guarantee was a further argument against trade confrontation… Fears that Trump would cut off weapons supplies to Ukraine, pull troops out of Europe, or even quit NATO overshadowed the talks, diplomats said.”
Within Europe, faced with the capitulation of the EU leadership, and that by figures such as Merz and Meloni, the far right has capitalised on this opportunity to gain further popularity by attacking the deal. Alice Weidel, co-leader of Germany’s far-right Alternative for Germany, stated that the deal was “not an agreement, but a slap in the face to European consumers and producers!”
Trump’s “divide and rule” tactic
Throughout his tariff war Trump has used a “pick them off one by one” tactic. The Financial Times noted that Britain, as usual, was the first to capitulate to the U.S. This was then used by Trump to pressure the EU: “When the UK struck a trade deal with Washington in May, accepting Trump’s 10 per cent baseline tariff, it encouraged those EU member states seeking a settlement, especially Berlin.”
What is to be done?
It is therefore crucial for all countries to oppose Trump’s attempt to impose a unilateral, arbitrary U.S.-controlled trading system on the world. This means
- That the WTO has to be defended against Trump’s attempts to completely overturn its framework, despite the WTO’s enormous biases and imperfections. However, this is likely to be extremely difficult given U.S. actions, such as sabotaging the disputes mechanism by since 2017 refusing to appoint judges to the WTO’s Appellate Body, rendering it inquorate and non-operational.
- For numerous Global South countries, the U.S. is not their main trading partner, China is. Global South regions are attempting to create or strengthen regional trade agreements. Therefore, strengthening South-South cooperation and trade is crucial to bypassing U.S. attempts to impose its arbitrary, unilateral trading system on the world.
- The deeply damaging trade agreement made by the EU with Trump is the main card used by the U.S. to attempt to impose its new trade system. The agreement again demonstrates that the traditional centre right and social democratic parties, and the dominant sectors of the European capitalist class, are unwilling and unable to defend the interests of Europe’s people and economies. This result is in line with the analysis of “Hyperimperialism,” published by the Tricontinental Institute for Social Research, which argues that the previous state of inter-imperialist competition has been replaced by one in which European capital capitulates to the U.S. on all major issues. Currently, Europe’s extreme right is gaining strongly from this situation. Both because of the importance of trade for economic development, and to prevent the extreme right from benefiting, it is crucial that progressive forces and the left in Europe firmly oppose the EU trade agreement with the U.S..
Success in defeating the new trading system arbitrarily controlled by the U.S., will require a long and hard struggle, but it is vital for international development and for all countries for the reasons outlined. Strategically, over time, this effort will become progressively easier as the U.S., due to its own tariffs, becomes a smaller part of the international trade system.