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Trump has meaningfully waged and further threatened trade war against the world, but particularly China. The full and final extent of Trump’s tariff measures is highly uncertain, as is what he aims to accomplish through them and what their real effects will be. Trump claims he will use tariffs to raise fiscal revenue, boost domestic manufacturing, and as a weapon to coerce geopolitical allies and supposed foes alike into deals and concessions meant to assert American dominance. This essay is concerned with the latter two motivations. We argue that Trump’s tariff war is both a tactical and a strategic disaster. Tariffs will not do the economic work of revitalizing American manufacturing he claims. And as a strategy, revitalizing domestic manufacturing will not ameliorate the deep crisis of US economic precarity, which is his promise to the American middle and working classes. Likewise, Trump has used tariffs as a direct means to impose political demands by economic force. This is emblematic of his geopolitical agenda: to impose US dominance through military and economic strength. This attempted recomposition of the world order through unmasked US power poses severe risks to climate collaboration.
That said, we cannot rule out the potential that Trump’s protectionist posture, especially in these early days of his second term, is mostly a matter of displaying dominance and disruption to his base, which will peter out following performative concessions by China and other trading partners. Yet, it is worth taking these tactical and strategic claims seriously. They reflect a deeper governing logic that unites both the contemporary right and center left in the limited prism through which both acknowledge and promise to ameliorate American economic distress. For both, revitalizing American manufacturing serves as a silver bullet for alleviating precarity. Regardless, this logic — both under Biden and Trump — has a darker strategic intention: to reshape the world system through military and economic force.
Well beyond Trump’s current term, it is essential to contest and transcend the terms of this governing logic towards greater equality and less precarity in American society, as well as global cooperation in the face of the planetary climate and ecological crisis.
Trump has now twice risen to power decrying the “American carnage,” of deindustrialization and promising a “new American industrialism.” Since its peak in the postwar era, US manufacturing employment has capsized from 32 percent in 1953 to just eight percent today. This collapse in manufacturing employment in the US is not only a matter of deindustrialization, as automation has also displaced labor. It is also due to the globalization of production and persistent patterns of long-term private underinvestment in capital upgrading and expansion, eroding the manufacturing value-add share of US GDP. The US now imports far more manufactured goods than it exports; this deficit is not balanced by US services exports, either. Meanwhile, China across the past two decades has emerged as a global manufacturing powerhouse that produces high value added manufactured goods and maintains a large trade surplus.
If we take Trump and his advisors at their word, they seek to use an aggressive tariff regime as a Swiss army knife tool to attack the whole of the US trade deficit and US deindustrialization. This week, Trump implemented aggressive and sweeping tariffs against key trading partners: on Canada and Mexico he has levied a 25 percent tariff on all imports; on China he has levied an additional ten percent tariff on all imports, on top of a previous ten percent universal announced last month, compounding targeted tariffs on Chinese imports implemented in Trump’s first term and under the Biden Administration. Already China and Canada have introduced retaliatory measures. It is unclear what will be the full extent of Trump’s trade war, but we are clearly in the midst of it.
Trump’s use and threat of tariffs to restructure the US’s trade deficit and revitalize US manufacturing assumes quite a lot about how capital investment happens in the contemporary economy, chiefly that private investment occurs at all. Increasing the US’s manufacturing base and boosting its global competitiveness — especially in key high value add or strategic sectors — is a matter of capital investment to physically expand production or upgrade capital equipment and manufacturing processes. Targeted tariffs have a place in the toolkit of a developmental state pursuing such aims but in a supporting role to other industrial planning tools, particularly public investment. For example, tariffs can partially insulate targeted trade sensitive industries from global price competition as they undergo capital upgrading, such as greening steel production. Likewise, at a macroeconomic level, tariffs can subsidize domestic industry by transferring income from household consumers to producers of tradeable manufactured goods. Directing resources from one sector to another is particularly important for resource-constrained developing economies pursuing industrialization. For example, tariffs on imported luxury consumer goods can suppress middle class consumption to direct precious foreign exchange reserves towards importing necessary machine equipment to support industry.
But to imagine Trump’s proposed tariff regime can achieve an aggregate boost to US manufacturing, especially to an extent which substantially increases US exports by value, assumes that aggressive and universal tariffs will subsidize existing domestic manufacturers enough to furnish profitability and, crucially, that these companies will respond to profits by investing to expand or upgrade production. Yet there is no guarantee that tariffs will increase profits for producers, as tariffs will increase the costs of goods across supply chains and are likely to trigger monetary tightening, which will in turn increase production costs. As far as capital’s propensity to invest goes, we are likely to see highly uneven and lackluster investment patterns. In general, it is hard to coax investment from private investors and companies due to the liquidity preference: in the face of fundamental uncertainty capitalists and the wealthy prefer to hold assets they can quickly liquidate into cash as opposed to sinking their money into expensive physical assets that may not be profitable long-term. But more specifically, recent decades have seen the revolution in corporate governance towards shareholder primacy and issues such as persistent long term economic stagnation and under-demand in the domestic and global economy, notwithstanding Covid-19 stimulus and inflation. It remains to be seen what will be the underlying structure and force of effective demand following the Biden era stimulus. We should anticipate that even where tariffs raise profitability for firms, they will likely decide to juice returns from existing assets rather than invest in the inherently capital intensive, and thus expensive, project of capital upgrading and expansion absent other industrial policy tools or corporate governance reform.
Yet, while Trump’s proposed tariff regime is particularly misguided as an approach to try to stoke domestic manufacturing investment given its regressive and inflationary impacts, it still reveals a throughline in recent macroeconomic governance across Administrations. This proposed regime is ultimately a state intervention to stoke capital investment, an acknowledgement that there is some need to govern private investment. And yet it also rests on a belief in a certain dynamism to capital and private investment. In this abstracted macro-vision of the economy, capital will respond to price signals and profits by increasing production, producing a generalized level of investment or reindustrialization and trade rebalancing. This vision of tariffs as stoking capital’s inherent dynamism and propensity to invest mirrors other recent policy episodes or paradigms in contemporary American capitalism. We have seen strong state actions to try to govern capital allocation or the state of the macroeconomy, but without socializing investment and allocation. As Common Wealth has extensively argued, much of the Biden Administration’s green state developmentalist policies rested on a “bribe to capital formation” logic that likewise sought to govern capital investment without socializing the investment function through direct public investment.
Similarly, in the recent inflationary episode, we saw in action a still entrenched macroeconomic and price stability regime that abstains from direct interventions to shape disaggregated supply or demand of key inputs, systems, or sectors; equally, this regime rejects other forms of price and volatility management from discrete price controls to financial regulation. As a result, the public surrenders qualitative meso- and micro-control of the investment function while macroeconomic stability policy (both monetary and fiscal policy) instead focuses largely on the one-dimensional question of over- vs understimulus at the macro level. Precisely because interest rate hikes only work by inflicting a macroeconomic contraction, instead of targeting the supply or demand of disaggregated commodities or services, they are inherently blunt tools to deal with inflation and the cost of living.
To the extent that we want to support domestic manufacturing, doing so would require a green mixed economy approach where the state increases direct public investment that targets capital formation in key nodes of the economy.
While tariffs are a tactical blunder, the now bipartisan consensus concern for boosting domestic manufacturing as a political economic salve over the wounds of widespread US economic precarity is a strategic one. At a macro domestic level, the US is a deeply unequal society with increasing economic precarity for middle and working classes. According to CNBC, 65 percent of Americans said they lived paycheck to paycheck in 2024. Trump has leveraged this economic crisis by funneling resentment towards reactionary politics. His threats around tariffs work rhetorically in this regard. To his base, he is upending the system and lashing out at a named enemy he claims is making everyday peoples’ lives worse. But even boosting manufacturing employment through more effective tools than tariffs would not create an egalitarian economy or ameliorate economic distress. The Biden Administration hung its hat politically on an attempt to boost domestic manufacturing employment as a bid against Trumpism: Bidenomics rested on the assumption that American workers would be able to press for higher wages amidst a growing and reindustrializing economy supported by fiscal and industrial policies, and that such wage gains would be enough to materially raise living standards and politically keep Trumpism at bay.
As Common Wealth has dissected, although inflation and the cost of living crisis affected wage gains and economic precarity, the Biden Administration’s strategy of resting on full employment and the hope of reindustrialization was always both hubristic and doomed to fail, attempting to raise living standards without meaningful class war against capital. The approach explicitly sought to revive what the economic historian Gabriel Winant described in a recent interview as “a historic connection in the mid-twentieth century between productivity growth and manufacturing and the possibility of a more egalitarian labor market and social structure”. In the postwar era, even in the absence of a European style social welfare state or more aggressive structures of redistribution and socialization, the rising productivity unique to manufacturing increased the wages, bargaining power and living standards of the working and middle class. Yet, this was only one possible avenue for creating a relatively more egalitarian society and one which is now harder to pursue given how productivity has outpaced employment in the sector and how deindustrialization and globalization of production has already occurred.
Moreover, this bipartisan offer of reindustrialization as a political economic salve is a blunder at the global level. Advocates of American trade protectionism on the left and the right point to China’s trade surplus as a distortion forced upon the global economy in response to its internal maldistribution of wealth and consumption: China must increase the domestic consumption of its working and middle classes through redistribution and a rebalancing between consumption and investment. This may very well be true as far as Chinese domestic political economy is concerned; and indeed China’s trade balance could affect the industrialization efforts of developing countries. But the framing that the US is the victim of Chinese distortions and therefore that trade war against China is progressive and egalitarian at both the US domestic and global level is misguided. The US does not need to reduce its bilateral trade deficit with China to meet domestic aims such as greater social stability or decarbonization nor to support global development.
Alongside Trump’s attempts to revive domestic manufacturing and to attack the trade balance with China, there are deeper strategic intentions. As a geopolitical instrument, tariffs contribute to two planks of Trump’s agenda — a revision of the postwar international order and an acceleration of Cold War competition against China — that were sparked into life under Biden. In the early days of the second Trump administration, this pivot has made US power more transparent. Whether by economic or military means, Trump is seeking to impose US dominance by force. The strategic implications of this for the US itself are not yet clear. But from a planetary perspective, Trump’s strategy beckons further disaster — a zero-sum world in which international collaboration towards shared climate goals is yet more remote.
The opening tariffs of Trump’s second term signaled the path ahead, deploying economic power to exact political demands. Following Gustavo Petro’s refusal to allow military aircraft to carry deported migrants to Colombia, Trump announced 25 per cent tariffs on all Colombian imports. After bilateral negotiations and reciprocal tariffs from Colombia, the two countries reached a deal to permit the deportations. This prefigured much of what was to come, with tariffs on Canada, Mexico and China following days later. Trump explained the tariffs on Canada and Mexico as attempts to counter the “major threat of illegal aliens and deadly drugs”. Again, rapid negotiations led to a climbdown with Justin Trudeau and Claudia Sheinbaum making pledges to reinforce their borders in return for a delay on tariffs.
Used in this way, tariffs are emblematic of the geopolitical underpinnings of the second Trump administration and the strategic risks it poses to a stable climate transition. Despite competing factions among US foreign policy personnel, tariffs distill the new strategy: domination by economic and military force without heed to the international institutions and norms that have underpinned US hegemony. While tariffs designed to exact political demands are an expression of economic force, the Trump administration has also leapt at the opportunity granted by Biden’s approach to military might.
In Gaza, the Biden administration set the tempo for the US to tear up the rules governing the international order. Through unstinting support for Israel’s genocidal military campaign which included the systematic targeting of the infrastructures of life (healthcare, water, food, energy, housing), Biden broke open a postwar order in which international laws were designed to protect and promote US leadership. The Trump administration has delighted in this, threatening the ethnic cleansing of Gaza as well as the seizure of Greenland and the Panama Canal. Amid this new normal, weaker states are left to accept US demands to avoid economic or military punishment. The withdrawal of military support for Ukraine left it forced to hand much of its natural wealth to the US. This wider drawdown has produced a scramble for rearmament across Europe, which will leave states devoting their fiscal resources to imports from US weapons producers.
Compounding the revisionist turn is the escalation of Cold War. Here there are two primary threats to the climate: first, the direct ecological impact of military industrial expansion through great power rivalry and second, zero-sum competition over the development of green industries and the supply of transition materials. The climate costs of a Cold War arms race are clear: the US military is already the world’s largest institutional source of greenhouse gas emissions, with a similar footprint to the nation of Portugal. Suggestions that Europe now needs a similar military industrial base are proposals for carbon intensive expansion. Proposals for “net zero” military might are equally untenable — zero carbon alternatives are unavailable for fighter jets and warships, the core sources of military emissions.
Just as dangerous is the threat posed by Cold War to technological and industrial cooperation around decarbonization. Under Biden, the US prioritized the development of its automotive base over the rapid decarbonization of its highest emitting sector by implementing 100 percent tariffs on Chinese electric vehicles. China has already responded to the escalating trade war with export restrictions on essential raw materials for green industry. Given the financial power and consumption levels of the US and Europe, paired with China’s preeminence in green technological sectors, there does not exist a pathway to decarbonization without deeper collaboration between competing powers. With instability and Cold War renewal threatening the climate agenda, it is essential to sketch alternative strategies.
The right has cornered the market on anti-systemic politics. Trump has come to power by recognizing the economic pain and political disenfranchisement of everyday Americans, explaining that pain through a full-throated critique of political and economic orders, directed against clear enemies, with bold broad policies and a sense of collective action as their solution. Tariffs are one part of this. 2025-2028 will be the decisive period for the climate movement and broader progressive movements to respond in kind with a clear, green, anti-systemic, and reconstructive policy program, especially in light of a Democratic Party establishment now seeming to refuse to develop a proactive counter strategy to the right. Common Wealth’s newly launched US program will focus on supporting a collective strategy to build a policy agenda and political movement that can address fundamental economic precarity and lay the economic underpinnings of rebuilding and defending a green American democracy for the 21st century. Our research and policy design will focus on four core pillars:
Over the next year, in partnership with Climate and Community Institute, Common Wealth will also unveil a new program of work that charts the threats posed to the climate transition by US foreign policy, military dominance and Cold War escalation. Rapprochement and a de-escalation of Cold War rivalry is imperative for the energy transition. Within a globally cooperative agenda for green industrial development, there is an opportunity to redeploy some of the remaining manufacturing strengths of the US to contribute to common decarbonization goals. Although not immune from the wider dynamics of deindustrialization and the globalization of supply chains, the US military industrial base is still the recipient of more than $400 billion in government contracts each year. As a government-directed industry, there is the potential to redirect existing investments to convert military industries towards civilian green sectors that can meet the challenge of decarbonization. Our program will study the ecological damages and geopolitical risks produced by the US military and set out industrial alternatives to meet the climate challenge.
