No.16 Summer 2018

The Trump presidency, US imperialism and the future of the neoliberal order

In the first 12 months of the Trump presidency, an uneasy working arrangement existed between the economic nationalist and the neoliberal camps within the White House and in the ruling class at large. The former, the president’s base during his 2016 election campaign, cheered on Trump as he pulled the US out of the Trans Pacific Partnership (TPP) and Paris climate accord, abused NATO allies and praised the far right at Charlottesville. The latter, who had for the most part feared a Trump presidency, welcomed the lifting of regulations on energy companies and banks, the white-anting of departments overseeing environment, labour and social security and Trump’s appointment of corporate lobbyists to policy roles in government agencies. The passage of Trump’s regressive tax reforms in December was something both camps could unite around. Even though the neoliberal camp and the broader political establishment objected to Trump’s withdrawal from the TPP and some of the president’s more blatant racist rhetoric, it appeared by the end of the year that Trump might evolve into a standard-issue right wing Republican president, albeit a particularly obnoxious one.

In 2018, however, the calculus has changed. To the dismay of the majority of the American ruling class, the president has lurched much more sharply towards economic nationalism and destabilisation of some of the country’s most important international alliances. The purpose of this article is to provide a brief summary of the main elements of this shift, followed by an assessment of the popular resistance to Trump’s project.

Trump’s turn to economic nationalism

If inconsistency has been the defining feature of Trump’s political career, protectionism has been one rare constant. In 2018, it has moved from the margins to become a central feature of his presidency. The shift started in January as tariffs on washing machines and solar panels were announced. This was followed in March by announcements of tariffs on steel and aluminium and in April of measures targeting trade with China. Meanwhile Trump restructured his Cabinet, appointing right wing economic nationalist hawks such as Secretary of State Mike Pompeo, national security advisor John Bolton, trade advisors Robert Lighthizer and Peter Navarro, and CIA director Gina Haspel.

In June, the White House turned the screws tighter, lifting the steel tariff exemptions that had been put in place three months earlier for NAFTA partners Canada and Mexico, along with the European Union. These countries joined Japan which had never received an exemption. Up until this point, US allies had sought to reach compromises with Trump on protectionism. The lifting of exemptions in June ended that phase, with the EU, Canada and Mexico all promptly announcing retaliatory tariffs. The breach between the US and its allies was opened still further at the G7 summit in Canada two weeks later when the US president faced a wall of opposition from the six other member states. As the US president refused to sign the final communique committing the G7 participants to defending the free trade system, the first time the US had refused to do so in the forum’s 45-year history, relations between the two sides sank lower. That Trump justified the steel tariffs by invoking national security provisions only added insult to injury for the US’s allies.

Trump’s attacks on the so-called “rules-based international trading order” arrive at a time when this order has already come under pressure from several factors. First is the failure of successive rounds of WTO negotiations to agree on further “liberalisation” of world trade and investment. This has been the result of serious conflicts within the ranks of WTO members based on their own sectional interests – whether as capital exporters or importers, commodity exporters or importers, established members such as the US and Germany or new members such as China, those with monopolies in advanced technologies and those trying to acquire them. While such tensions are inherent in the WTO and its predecessor GATT, as the body grew larger and more diverse it inevitably widened the scope for such tensions to become intractable. In the absence of multilateral agreements at the WTO, bilateral free trade deals have become the norm, giving rise to the so-called “spaghetti bowl” of confusing trade regulations that now confronts big corporations looking to export and invest overseas.

The global financial crisis (GFC) of 2008 was another blow to the international trading order as world trade contracted dramatically overnight. Although contraction gave way to expansion in subsequent years, the heyday of globalisation is clearly over. At its height, in the period from the mid-1980s to the GFC, world trade grew twice as fast as world output. Since that time it has grown by only half as much. This has applied not just to trade but investment flows. Foreign direct investment (FDI), one of the main drivers of globalisation, fell sharply during the GFC and has failed to recover to its 2007 peak in the decade since. International supply chains, another feature of globalisation, peaked in 2012, according to the United Nations Conference on Trade and Development.

Trump’s decision to abandon new multilateral agreements in favour of bilateral negotiations will, therefore, only add further pressure to the world trading system. Trump and his economic nationalist advisers appear to be favouring bilateral negotiations on the assumption that the US can leverage its economic and military strength against its competitors to reach more advantageous deals.

Trump’s shift towards a hardline protectionist agenda is alarming the American ruling class, which sees in the multilateral world trading order the best opportunity for US capitalism to prosper. Trade wars involve significant overheads from their perspective. Trump’s tariffs on steel imports, for example, may boost profits in some sectors of the steel industry but they increase costs for every other sector of US capitalism, making American industry less internationally competitive. The same goes for tariffs on imports of parts and components used by US manufacturers. Retaliatory measures by US trading partners will hurt US exporters: the agricultural, aerospace and automotive industries, the biggest exporters to China, have already registered their concern at the prospect of a trade war with China.

As the production of some lines of industry and services has become partially unmoored from its “home” territory by businesses using international supply chains, tariffs no longer have the straightforward effect they once did in protecting some “national” capitalists and penalising “foreign” capitalists. Under the auspices of NAFTA, for example, US car manufacturers have moved significant assembly operations to Canada and Mexico. These countries now account for nearly one half of total automotive imports to the US. Likewise, Ford has moved some of its car production to China for sale both in the local market and for export back to the States. Trump’s tariffs will therefore both protect US car manufacturers from, for example, Toyota’s exports of Japanese-built cars to the American market, but will also hurt them by adding 25 percent to the price of their own cars built in Canada, Mexico or China and shipped to the US. Evidently, Trump and his economic advisers hope that tariffs will encourage American businesses to bring offshored manufacturing operations home, but even with corporate tax rates slashed and energy and labour costs reduced, the cost advantage of running factories offshore is still sufficient to discourage many from doing so.

To the extent that the Chinese government retaliates to US tariffs by imposing restrictions on US companies operating in China, this will hurt blue chip American companies such as Apple, Walmart and Starbucks. In-country sales in China by the subsidiaries of big companies such as these now generate a very lucrative revenue stream for Wall Street.

Trump’s economic nationalist program is very clearly a threat to US allies. EU capitalists face threats from two directions. One is the impact of tariffs on their exports to the US market. The other is retaliatory tariffs announced by third parties such as China on exports from the US. BMW and Daimler, for example, account for $7 billion of the $11 billion in automotive exports from the US to China, sourced from their factories in Alabama and Kentucky. They will now have to factor in Chinese tariffs on their American-made cars.

Trump has gone on the offensive against US allies on a range of fronts, not just trade. The president has scorned German chancellor Angela Merkel for her decision to allow hundreds of thousands of refugees to enter Germany in 2016. He has described Germany as a free-rider in NATO and regularly criticises the German government for not spending enough on its military. He has censured Germany for its reliance on gas imports from Russia. That Merkel appeared, with Macron and Trudeau, to lead the charge against Trump at the G7 forum in Canada in June will only confirm Trump’s animosity towards the German chancellor.

And then there is the case of Japan, probably the US’s most loyal ally in Asia and a key partner in US attempts to block the rise of China. Japanese prime minister Shinzo Abe has been an uncritical Trump supporter and has positioned himself domestically as a man with the ear of the US president. But Trump is snubbing Abe at every turn: his refusal to exclude Japan from the steel tariffs when they were announced in March comes on top of US withdrawal from the TPP, a project strongly championed by Abe. And Trump appears to have sidelined Japan during negotiations with North Korean president Kim Jong-un in Singapore in June. The Japanese prime minister is taking a lot of flak at home for promising much from his relationship with Trump but achieving little.

If the art of politics is to unite one’s friends and divide one’s enemies, Trump appears only to be turning US friends into enemies and emboldening traditional US foes. The political class in the West is growing increasingly anxious that the US under Trump is now opening the way for China to take advantage of disunity in the Western camp.

The Iran deal

Trump’s decision in May to walk away from the nuclear deal with Iran (the Joint Comprehensive Plan of Action) is a further signal of the president’s disdain for the concerns of America’s allies.

The signatories to the 2015 Iran nuclear deal (the five permanent members of the UN Security Council plus Germany) did so in the belief that it was the best deal available at the time. Nothing has occurred since to change their minds. The deal appears to have halted development of the Iranian nuclear program, while European business has undertaken new investments in Iran: EU trade with Iran grew from $9 billion in 2015 to $25 billion last year. The return of Iranian oil to international markets was helping to keep a lid on oil prices. And now Trump has blown it all up.

The internal reaction within US ruling circles was swift and almost unanimously hostile. Typical was an op-ed piece by Obama’s national security adviser Susan Rice in the New York Times on 8 May, titled “Trump’s most foolish decision yet”:

The costs to American global leadership are steep. When the United States unilaterally abrogates an international agreement in the absence of any breach, we undermine international perceptions of our reliability and responsibility. That is precisely what we have already done with the Paris climate agreement and the Trans-Pacific Partnership. But violating the Iran deal is far more dangerous.

Trump’s critics in the US and Europe argue that the Iran decision represents an enormous setback for relations between the two sides. The Financial Times, a respected sounding board for international capital, wrote in its editorial on 10 May:

President Donald Trump’s unilateral decision to abrogate the Iran nuclear deal is not only a threat to peace in the Middle East. It also puts the close relationship between the US and its allies in Europe, which has held strong through two world wars, as well as the cold war and its tumultuous aftermath, in serious jeopardy.

Trump’s announcement was a slap in the face, in particular, for Merkel and French president Emmanuel Macron, who had flown to Washington in the week before the deadline for renewal to appeal to Trump not to walk away. Days later, Trump did just that.

Trump’s move on the nuclear deal is one element of a much more aggressive US campaign of regime change aimed at Tehran, as advocated for years by national security adviser John Bolton, along with Israel and Saudi Arabia. Such a plan will presumably involve escalating sanctions and/or a military attack. There is, however, not much evidence that the US can reap much reward from such an approach. It is unclear how much leverage tougher US sanctions will have on the Iranian government: broad-based UN sanctions certainly squeezed Iran prior to 2015, but today China and Russia would feel under no obligation to follow the US in pressuring Iran with a renewed embargo.

Much clearer is that a full-blown military offensive against Iran would be a disaster for the US on a far greater scale than George W. Bush’s invasion of Iraq in 2003. Bush could at least count on support from Britain, Spain, Holland and Poland; such support would be unlikely this time around. Saudi Arabia and Israel may be keen to pitch in, with Israel attacking Iranian military operations in Syria within 24 hours of Trump’s announcement of withdrawal from the Iran deal, but such support would not carry the same diplomatic weight as Bush’s Coalition of the Willing in 2003. Further, Iran is no basket-case. Even though the Iranian economy may be in dire straits, it remains the Middle East’s second largest economy after Turkey. And its military is infinitely more capable than that of Iraq in 2003. With forces on the ground and allies in place in Lebanon, Syria, Iraq and Yemen, Iran has much greater ability to push back against the US and its allies. Pulling out of the Iran deal will only exacerbate regional hostilities by boosting both Saudi Arabia and Israel on the one hand and the Tehran hardliners on the other. Even if this keeps Trump’s cabinet hawks happy, the US will bear the cost of alienating important allies.

The US as an indispensable power

The problem for America’s traditional US Western allies is that while they are growing increasingly annoyed by Trump, the US still remains what Bill Clinton’s secretary of state Madeleine Albright called the “indispensable nation”. Even though the US may be weaker than two or three decades ago, relative to its rivals, it is still the biggest imperialist power. It holds two aces in its hand. First and most important is its military might, which dwarfs that of its allies. The US possesses not just the most important military power in the world but a military overseen by a unified command structure. The combined military spending of the EU member states, for example, is far short of that of the US and military command is in the hands of the governments of its 28 member states, each with its own national interests. Every European government understands that it ultimately depends on the US nuclear umbrella. Withdrawal from the EU in 2019 by Britain, one of the bloc’s two big military powers, only emphasises EU military impotence. Canada, too, is incapable for reasons of geography and relative size of breaking from the US military set-up overseeing North America, while Japan, despite being an economic giant, still depends on US bases and the US Pacific Fleet for defence against any potential threat from China or North Korea.

The second ace in the US’s hand is its financial power. Most major businesses around the world operate in a business environment dominated by the US dollar, which is the world’s most used trading and reserve currency, the Federal Reserve Bank, the world’s most important central bank, and Wall Street, which remains the world’s biggest financial clearing house for businesses and governments. Like the US marines, the US dollar is indispensable to Washington’s Western allies. No matter what moves Trump takes to undermine the international trading system, no Western government has any ambition to challenge the US dollar.

It is these two aces – military power and financial power – that give Trump the ability to thumb his nose at the EU and other US allies. This is clear when it comes to the US decision to break from the Iran nuclear deal. The EU, eyeing the growing trade linkages with Iran and still committed to multilateral diplomacy, is keen to try to salvage the deal. But member states know that most major European businesses depend on finance raised through US banks or the US stock market or have other business relations with US companies. Faced with the prospect of US secondary sanctions, they must decide: the US or Iran? The answer for most will be obvious: most European businesses will bite the bullet and pull out of trade with Iran. Trump’s gamble that unilateral action will be enough to crack EU opposition will probably be borne out. Similarly, Canada’s prime minister Justin Trudeau states that US tariffs will be met in full by Canadian tariffs, but the US represents 75 percent of the market for Canadian exports, Canada for just 15 percent of US. The result is that Canada is much the more vulnerable to any trade war, even if the experience will come with costs for US capitalists.

Combating imperialist rivals

If Trump’s policies in relation to US allies are causing concern in the ranks for the American ruling class, his stance towards China is more reassuring. China has become the existential threat to US imperialism in the past decade. Measured on a purchasing power parity basis, its economy is now larger than that of the US. As the biggest trading partner of more than 100 nations and an increasingly important foreign investor, its international influence is steadily growing at America’s expense. Its military capacity, even though still much weaker than the US, is growing at a faster rate and it has now consolidated outposts in the South China Sea in an effort to displace the US in the world’s most important sea lanes. Central to its transition from a low-wage export platform to a mature industrial power, the Chinese government’s “Made in China 2025” strategy aims to gradually wean China off dependence on importing advanced technologies and to build world-beating champions of its own in high-tech industries, particularly those with military uses.

This is the context, then, for US moves to push back economically and military against China, as explained in the Pentagon’s National Defense Strategy published in January. Many of Trump’s trade measures announced in March and April are designed to stymie China’s high-tech industrial development by restricting access to American technology, in particular in aerospace, information and communications technology and advanced machinery, areas where the US still enjoys a big lead over its Asian rival. The National Defense Strategy, significantly, refers to these as America’s “national security innovation base” which has to be protected.

Although American business is worried about the effects of tariffs on China, the US ruling class more generally is more open to measures targeting China’s efforts to use US-originated technology to advance its military capacity. On the military front, there appears to be a similar unity of purpose. Last December, the US Congress ratified a military appropriations bill comprising tens of billions of dollars more than requested by the president, taking US military spending to a combined total of $1.4 trillion over the 2018 and 2019 financial years, a record amount. So far as Wall Street is concerned, this is money well spent to defend the American empire.

Trump’s relations with Russia are more vexed. His attempts to strike up a cordial relationship with president Vladimir Putin, his family’s close business relationships with Russian oligarchs, and his request at the G7 summit in June that Russia be invited to rejoin the bloc, not to mention the suspicion in some circles that the president may be personally compromised by Russia, have all caused concern within the US ruling class. Overall, however, Trump is pursuing a strategy towards Russia that is consistent with US elite interests. Russia may not be as much a threat to US hegemony as China, its economy being far smaller, but it does have the largest nuclear arsenal in the world and extensive military experience. Its military push in recent years, in Crimea, Ukraine and Syria, has established facts on the ground, while the US’s international forays have been much less assured.

The ruling class is therefore solidly behind Trump’s decision to reactivate the US Second Fleet to bolster the US and NATO presence in the Atlantic. They also applauded his expulsion of 60 Russian diplomats in March, following the nerve gas attack in England, and the imposition of two more rounds of sanctions against Putin’s business allies. In these respects, as with the president’s response to China’s rising power, Trump’s actions are in line with what the ruling class might have expected of a Clinton presidency.

Demonstrations of US weakness: Syria and North Korea

Syria and North Korea demonstrate that although the US remains the dominant world power, its ability to dictate terms to the rest of the world has been weakened, the result of the debacles in Afghanistan and Iraq, the global financial crisis and the rise of China.

In Syria the limits to American power have been demonstrated by its inability to do much about President Bashar al-Assad’s chemical weapons attacks. Obama had announced that such attacks constituted a “red line”, but when Assad used chemical weapons in 2013, Obama only stood by. Even though Trump criticised Obama for his failure to enforce his “red line”, he has proven equally ineffective in imposing American authority on the Syrian president When Assad mounted a chemical attack in April last year, Trump ordered a cruise missile strike on the Shayrat airfield. But this was no more than a gesture, having no impact on Assad’s military capacity. When Assad mounted another chemical attack in Eastern Ghouta 12 months later, Trump had to take a stronger stand or risk being tarred with the same brush as Obama – weak and irresolute. So Trump ordered another attack, this time involving twice as many cruise missiles against three regime targets, backed by Britain and France. But, again, a very limited display of firepower. Assad calculated that the US would not do anything serious against his military assets for fear of precipitating a fight with Russia, a much more serious US adversary. Assad was right: bombing by the US and its allies steered clear of Russian military assets. With minimal damage to his military capacity a second time around, Assad was able to boast to his supporters in Damascus that he had once again defied the US.

The US has therefore had to accept defeat in Syria: Assad has kept his chemical weapons, continues to use them and the US can only stand by and watch. Trump now has to deal with the question of what to do with the 2,000 US troops currently deployed in Syria now that their ostensible objective – destroying ISIS – has been achieved. Trump appears to be keen to pull them out; the Pentagon, along with Saudi Arabia and Israel, are alarmed at the prospect of allowing Iran a free hand in Syria. But, in any case, the future of Syria is hardly in the hands of the US: much more significant is the jockeying and sparring currently under way between Russia, Iran, Israel and the Damascus regime.

Trump’s summit with Kim Jong-un also demonstrated the limits of US power. The North Korean leader forced the US president to meet as an equal and, in reality if not in form, to recognise North Korea as a nuclear power. This outcome significantly weakens US credibility in East Asia. While the Democrats and liberal media poured scorn on Trump for having been outmanoeuvred by Kim at the summit, the reality was that, short of sparking off a conflagration on the Korean peninsula, possibly even a war with China, the US president did not have many options. The agreement reflected the limits of US imperialism after the failure of the Bush administration’s neocon project and the Obama administration’s abortive “pivot to Asia”. The outcome, along with the US’s sabotage of the Iran nuclear deal, can only reinforce the belief among the US’s enemies that possession of nuclear weapons is the only safeguard against US bullying. The absence of such weapons saw the leaders of Iraq and Libya overthrown and executed, the possession of the same has garnered Kim gushing praise from the US president and an invitation to the White House.

Trump still unpopular at home

Taken over the course of his presidency, Trump remains the least popular US president for many decades. Nonetheless, since his approval rating bottomed out at 35 percent last December, it has recovered modestly, reaching 42 percent in June. The margin of disapproval over approval has likewise shrunk from 25 percent to 12 percent. The revival has come about mostly via extremely strong support among Republicans, 87 percent of whom register their approval of the president, as against just 10 percent of Democrats.

The most obvious factor explaining the revival in Republican support is the tax cuts passed in December, something heavily endorsed by Republicans. This is hardly surprising since twice as many Republicans as Democrats have seen their pay increase as a result of the tax cuts. Another factor helping the president is unemployment dropping to below 4 percent: 84 percent of Republicans say that Trump is doing a good job of making America prosperous, as against only 19 percent of Democrats. The president’s belligerent economic nationalism and racism, which in his supporters’ eyes constitutes “Make America Great Again”, also appeals to the Republican base.

Some commentators have argued that Trump’s polling is remarkably weak given that the US economy is enjoying its second longest expansion on record. This may have much to do with the reality of life for many American workers who fail to enjoy many of the benefits of this recovery. Millions of American workers have dropped out of the labour market since 2014, with participation rates for both men and women falling. Many of the jobs that have been created since the GFC have been non-union, low-wage, service sector jobs, in warehouses and call centres for example. Earnings for workers are flat. Such factors help explain why Trump cannot make any inroads among Democrat supporters and why his approval rating is still stuck at well under 50 percent.

Within the Republican party, however, Trump reigns supreme. His base is fanatically loyal and the president has used this to remake the party in his own image. Outspoken opponents have been sidelined or driven out. The traditional leadership of the party, hostile to Trump during the 2016 preliminaries, is now having to bite its tongue for fear that Trump’s base will mobilise against them and force them out. The Mueller inquiry and the string of scandals concerning the president and his family are potential problems for Trump, but for the time being they have not tarnished the president in the eyes of his base who see in them only the swamp trying to tear down their hero.

The mid-term elections in November will be a test of how much the president’s loyal base translates into holding up support for the Republican party in Congress and Senate. If the party loses control of Congress, that will limit Trump’s room to make appointments and push through legislation. Regardless, the Trump presidency marks a definitive change in the US political scene, arising as it does out of the steady erosion of the neoliberal model dominant over the preceding three decades. There is no going back to the old status quo.

Domestic opposition and the pull of the Democrats

The general approach of the Democrats has been to try to coast back into office on the back of the unpopularity of Trump and the investigations of the Mueller inquiry. They have shifted to the right quite considerably after a brief flirtation with the popular resistance in in the president’s first few weeks in office, calculating that they have the left in their pockets and therefore must chase the right. When it comes to the offensive against China and expanding the military budget, they share Trump’s agenda and attack the president only for being insufficiently aggressive towards Russia and North Korea. They criticise the president’s attempts to repeal Obamacare but will not back a single payer system and they are not even talking about repealing Trump’s tax cuts. There is little in principle, therefore, that separates Trump and the Democrats on some of the important questions of the day. Bernie Sanders, although still the most popular politician in the US, has swung to the right since his preselection defeat to Clinton, and many of his supporters have been purged from important positions in the party. It is unlikely that any attempt by Sanders to have another go at the Democrat nomination in 2020 will recapture the grassroots enthusiasm of his 2016 bid.

If the Democrats have veered to the right, this is not matched by American public opinion. Polls regularly indicate opposition not just to Trump but to capitalism and, among young people in particular, support for socialism. There are limits to this of course: socialism for most Americans means something like a Scandinavian welfare state, free education, single-payer health care, etc.

The more important limit to the leftward shift is that there is no significant organisational outlet for it other than the Democrats, which have long demonstrated their capacity to co-opt radicalising young people. The campaigns that have emerged in recent years – for example Black Lives Matter, #MeToo, the anti-gun campaign – have not lasted long enough and have not been deep or big enough to generate a radical left-wing current within their ranks, in the way that the Vietnam campaign did in the ’60s. And the far left in the US is far too small to pose as an alternative for the large numbers of disaffected and radicalising young Americans.

So it is now, when, in the absence of any radical current of any size, social movements are experiencing the pull of Democrat election campaign machinery as the party positions itself as the default anti-Trump organisation. The Women’s March in January this year was much larger than many were expecting, but also much more closely tied to the Democrats than in 2017. The unions too, their backs to the wall, lack any perspective of fighting industrially and look to the Democrats for salvation. Most major African-American organisations are heavily invested in the Democrats.

The main bright spot in US politics this year has been the strikes by teachers in a string of red states, the biggest outbreak of labour militancy for some years. These strikes have been characterised by a quite unusual degree of local organising; in these states, where “right to work” laws are in force, the official union apparatus is extremely weak and national unions are virtually invisible. The absence of a big union machinery gave rank and file education activists the space to take initiatives, usually via social media and their own workplaces, without being immediately squashed by the higher union apparatus. Nonetheless, if the teacher strikes are to make a bigger impact on US politics, they need to break through into the bigger states where local activists will face greater pressure from Democrat-aligned officialdom which will not want to rock the boat in an election year. Even in West Virginia and Arizona, the best activists were pulled by the “We’ll remember in November” slogans for the Democratic party, demonstrating that the left in the labour movement still faces the challenge of breaking the stranglehold of America’s second most enthusiastic pro-capitalist party.