Trump’s trade war is a class war designed to weaken progressive taxation, writes Omar Ocampo.
President Donald Trump displaying his tariff plans on April 2 at the White House. (White House/Daniel Torok)
By Omar Ocampo
Inequality.org
Trump’s trade policies have been wildly unpredictable in the first two months of his second presidency. Tariff deadlines have come and been delayed with no rhyme or reason, leaving cross-border trade in the lurch.
Such volatility was a nightmare for investors in the top 1 percent, but they are now given some clarity thanks to the inauguration of Trump’s so-called Liberation Day — a comprehensive set of retaliatory tariffs imposed on all imported products from trading partners who allegedly disadvantage U.S. exports through their own regulatory regime.
But this class of high net worth individuals have no reason to be nervous or anxious. They are set to see long-term monetary gains because they have the resources to properly adapt and make financial decisions that expand their capital, not to mention the economic benefits they will receive from the tax cut that is currently part of the Republican agenda.
Yet the same cannot be said for the working-class. The indiscriminate deployment of taxes on all imported goods is a blatant attack on their living standards.
And that is because Trump’s trade war is a class war designed not to revitalize American manufacturing, but to weaken progressive taxation.
The Trump administration has argued that the implementation of tariffs is critical to ushering in a new era of American prosperity. The administration expects this tariff regime to generate a massive windfall in tax revenue, making trillions of dollars available to the federal government over the next several years. The money raised can then be used to reduce the deficit and service our ever-growing national debt.
Government coffers will be overflowing with so much revenue — so the argument goes — that the IRS can be abolished and replaced with a new agency, the External Revenue Service. Federal income taxes will gradually become obsolete and be thrown into the dustbin of history, never to be resurrected again.
- Some of the reciprocal tariffs that Trump announced on April 2. (White House/Wikimedia Commons/Public domain)
Experts and observers have already refuted many of the core arguments advanced by Trump and his cronies. The nonstrategic deployment of tariffs will not make American manufacturing great again and the math does not support the administration’s fantastical revenue estimates.
To boost domestic manufacturing, tariffs need to be implemented and targeted towards industries with relatively low but growing demand. Renewable technologies and electric vehicles are two quintessential examples. Otherwise, tariffs on highly competitive goods will inflate prices and put U.S. corporations at a disadvantage against their foreign competitors.
- More of the Trump tariffs announced April 2. (White House/Wikimedia Commons/Public domain)
Furthermore, these import taxes will not be paid by foreign firms or countries. The tariffs will be paid by U.S. citizens and residents, and it will make an array of imported consumer goods more expensive, putting a greater strain on the budgets of working-class households. One estimate says that “liberation day” will reduce disposable income of the average household by at least $1,600 and as much as $2,000. In short, it will not enrich our citizens.
Higher prices may boost corporate profits if consumption levels remain constant, but there is no guarantee that this extra revenue will be invested into expanding the productive capacity of the country. Corporate profits have soared over the past 50 years and these earnings were not invested in domestic manufacturing, but instead they were distributed to support excessive executive pay, dividend payments to shareholders, and record-breaking stock buybacks.
Tariffs, if anything, exacerbate the already existing problem of extreme inequality. When the economic pie of the rich expands, they will use these new resources to extract more wealth from the working-class through the acquisition of critical assets like residential housing and infrastructure that we rely upon like energy plants, often through private equity and asset management firms.
These investment management firms rarely improve quality of service delivered, but they do raise prices to ensure higher profitability for their wealthy clients.
The only way to reverse our deteriorating standards of living and extreme wealth concentration is by taxing the rich and increasing the availability and accessibility of public goods.
The tariffs and the tax cuts to come will do little to fulfill Trump’s promises of balancing the budget, spurring investment into manufacturing, raising revenue, or creating new jobs with dignified wages. It does not help or deliver benefits to the working-class, but it will transfer more of their hard-earned wealth and income to the top.
Omar Ocampo is a researcher on the program on Inequality and the Common Good at the Institute for Policy Studies.
This article is from Inequality.org.
The views expressed are solely those of the author and may or may not reflect those of Consortium News.
So if investors risk their own money by investing in businesses that hire people and produce goods, should they not be given some return on their investment in the form of dividends?
can’t understand why some of the poorest countries are slapped by the highest tarrifs. high tariffs on their exports, mostly consumer goods, will finish off their exporters and manufacture, while their goods will become too expensive to buy. zero-sum? nah, zero-zero more likely.
The effect on inflation within the USA will be interesting.
If American goods become more competitive because imports are more expensive, then it will be possible to charge more for them. That will transfer wealth from ordinary citizens to the wealthiest citizens.
From Wikipedia, there is this statement about the effect of the repeal of an earlier system of tariffs, “The Corn Laws” in the UK in 1846:
“According to one 2021 study, the repeal of the Corn Laws benefitted the bottom 90% of income earners in the United Kingdom economically, while causing income losses for the top 10% of income earners.”
Thank you.
It appears the game of musical chairs for a spot in the plutocracy is over. The music has stopped, and anyone without a chair in the big club is to be a permanent underclass.
People have to be made desperately poor so they will accept any job they can get under any conditions. There has to be a depression to get workers rights abolished, military recruitment up, or conscription passed. A lot like in the 1930s.
The last vestiges of social security and progressive tax will slide into memory, then the memory hole. The plutocracy will not need to dress in the petty trappings of liberalism or constitutional law to maintain a veneer of respectability, they will be open about their fascism.
Maybe a lot of people will cheer, because the state is standing up to the great enemy, not knowing their own rulers were the aggressors.
If the empire is to continue, it needs to crush its own people into submission. Only then can they be mobilised to toil and bleed for their betters.
Just speculative doom and gloom, I know.
Good hearted people have trouble believing how far psychopaths with power will go, all while still smiling for the camera, shaking hands and kissing babies.
My hope is that the global majority in BRICS will rise faster than the US can mobilise for total war. In that regard tarrifs are a double edged sword. I think they will accelerate the development of non-$US based relations. The US consumer market isn’t a weapon if very few can afford to buy anything.
Socialism or barbarism is the question as usual I suppose.
First they came for the…
That’s right, more of the same: no taxing the oligarchy, Congress will renew the tax cuts from the DT1 regime era, and more tax cuts are in the works. And overhauling tax incentives to offshore manufacturing? Nah, this is all a ruse as usual.
Another recent article on this, from Ben Norton at the GeopoliticalEconomy dot com website. Naked Capitalism is also a great source of economic and financial content.
The mentally ill orange emperor is just “smart” enough to burn the house down, so he and his cronies will collect the insurance, then buy up the place at fire-sale prices. The rest of us will be left with ashes. The Decline and Fall of the US Empire is being expedited, what a great job they are doing eh
After waisting trillions in wars and in the most brutal and inhumane of Genocide, he needed to find the way to make the people pay for his and his master’s wars.
He should have at list be honest and called it “the Genocide sponsor tax”.
And while the small investors loose all their assets and are forced to sell out their stocks for pennies on the dollar, his billionaires club is set to buy them off, receive tax cut for doing it, and expand its hegemony and control over the fiat money based scam for the gullible, The stock market.
Thank you for sharing.