So, the great ‘Orange Oracle’ has spoken, and the long-awaited tariffs have landed. Unsurprisingly, there is little that can be said with certainty, at this point in time, save that the vast bulk of capitalist economists think this policy is lunacy and the approach to the calculation of these tariff rates was ludicrous.
But while there may be lunacy at play and the process may be ludicrous, they still have to be taken seriously. While unquestionably less economically dominant than previously in living memory, the US remains the most powerful economy – attached to the most powerful military – on the planet, and a cynically malicious and dangerous giant is still a giant.
The story is still being written, and the world is in the early stages of responding. In the short time since their announcement the Chinese state has imposed an initial 34% counter-tariff, with higher tariffs promised; the UK government has tried to bow even lower in submission; the EU is showing signs of tension between different national leaderships; some governments of poorer countries are offering abject surrender. But no serious bourgeois authority, from the IMF to the Federal Reserve to the ECB, questions that this will lead to serious economic problems. Growth is projected to fall, inflation to rise, and the risk of recession, already visible on the horizon, looms far larger now. The parasitic stock market jockeys so prone to sentiment have rushed to sell with trillions in value being lost globally.
The Real Economy: What is the Impact?
In the real economy, the blunt truth is that nobody knows what the hell is going on, and this has real implications for the lives of workers. Big capitalist interests won’t risk investing in new plant, products, equipment when they are not confident of a good rate of profit. Governments will change their policies to best protect their domestic capitalist classes – typically at the expense of the working class. Central banks will pause interest rate cuts as they wait to see where inflation and growth go – the real risk here, of course, is stagflation. This mix of economic stagnation and inflation leads to central banks being torn between cutting rates (to boost borrowing, demand, investment) and raising rates (to reduce demand and thus reduce inflation).
As it currently stands, the ECB’s primary purpose is to keep inflation at a little under 2%; Therefore, unless the EU treaties are amended, we can expect increased interest rates, reduced demand, job cuts, government cuts and a very real risk of recession in an already sluggish economy. It goes without saying that social welfare, social care, education, health and climate would all be in the firing line, while state money would flow unhindered to the arms industry. And here we can very strongly expect water charges to be back on the agenda.
Trump Administration Poses Deadly Threat to Irish Capitalism
More locally, the situation has its own peculiarities. Successive Irish governments have made a virtue of being the ones offering their services most cheaply to international capitalists – a policy which could have been considered to make sense in the capitalist world, when the national economy is underdeveloped, as a means to accumulate wealth and transform a society. And just as bosses will always. welcome someone offering to work for less than other people, big multinationals have flocked to Ireland. Decades of this have seen government coffers swell and successive Fianna Fáíl-Fine Gael-Labour-Green Party-Progressive Democrat governments have failed utterly to use this money to provide basics such as affordable housing, decent healthcare, well-resourced education, good public transport, good roads, reliable water supplies, and many other vital social necessities besides.
Now that party is under threat. In 2024, Irish exports amounted to €224 billion – an astonishing 47.6% of GDP. About one-third of that went to the US – €72 billion – of which €58 billion were in pharmaceuticals. Pharma has not yet been hit with tariffs, but Trump and his Commerce Secretary Lutnick have made it very clear that they have pharma in Ireland in their crosshairs. It has been estimated that pharmaceutical exports to the US could halve in five years should the 20% tariff rate be applied to pharmaceutical products. The consequences, especially around the lower harbour in Cork, could prove as devastating as the closure of Ford and Dunlop in their time.
All of this, along with the increased risk of inflation and recession in the US, where even the threadbare standards of democratic accountability have been severely harmed, and the capitalist class are rushing to kiss the feet of, Donald Trump, the would be autocrat.
No Return to Austerity: Workers Must Organise to Fight Back
The situation points very clearly to the need for workers in all countries to prepare to organize a resistance and a fight back. In the looming trade war, the only winners would be the capitalist class, as it uses the crisis to force through policies which will benefit it in the longer term, pillaging the lives of the less well off.
But it points to much more than that. This sort of lunacy can only happen because under capitalism we continue to live in a world broken into competing nation states. Capitalism, by its nature, needs growth which can come from new markets, ever cheaper materials and cheaper labour. Once the planet was carved up between the ruling classes of different nations then competition between them became essential to their efforts to grow and increase their wealth. And every conflict, whether hot war, cold war, trade war – has as its main casualty the living standards and often the lives themselves of the working-class majority.
The Socialist Alternative to Capitalism’s Hatred and Division
What we’re seeing play out now is a consequence of just such a need on the part of US capitalism to solidify economic dominance of the globe – and the need is being filtered through the bigoted racist, xenophobic, bullying American nationalism of Trump and the Christian Right who cheer him on. The only way to end this cycle of destructive conflict between nation states is to remove them from the equation entirely and move to a system of global government, solidarity and cooperation, which means a move to socialism. But that, in turn, is unthinkable under capitalism, which relies on nationalism, fear and hatred to turn workers against one another and therefore prevent us from uniting in our own interests.
Ultimately the way to end the stupidity of trade wars, to allow for improved services, living standards, job security and climate action can only be through socialism. And ultimately, the only successful way to respond to these tariffs and to the looming crisis, is to fight for socialist change.