EDITORS’ NOTE: Trump’s trade war is rapidly developing and the full impact of his tariffs is not yet clear. Neither tariffs nor free trade are in the interest of the working class. Whether tariffs are used to shield domestic industries or enable “competitive” global markets, the result is often the same: workers are expected to bear the cost, either through higher prices or job insecurity.

In this Q&A, we provide socialist answers to many of the most urgent questions working people and young people are asking today. The pace of developments means that this Q&A is not the final word on tariffs or the world economy. Rather, it is a starting point for those looking for a socialist analysis that cuts through the pro-capitalist propaganda and lies of corporate media. Limited space means that we are not able to examine each question in its full depth, but our hope is that these brief answers help our readers better understand the broad points of the economic situation. For more international analysis on Trump’s trade war and the internationalist, socialist fightback, visit our international website at internationalsocialist.net.

What Are Tariffs?

Tariffs are a tax on products imported from other countries. Tariffs are designed to make imported goods more expensive. But, because U.S. importers still need to make a profit for their executives and shareholders, they pass any increased shipping costs onto workers in the form of higher prices or by finding ways to cut labor costs through automation or layoffs.

What Has Happened So Far?

Trump began imposing tariffs on Mexico and Canada in early 2025. Further tariffs then followed. Then, on April 2nd, Trump implemented steep tariffs on goods imported from other countries. Investors panicked as $4 trillion evaporated from the stock market, causing the value of workers’ 401k retirement accounts to plummet as much as 15%. Wall Street, CEOs, and billionaires who supported Trump on the basis of tax cuts were further frustrated when Trump seemed to accept an economic recession as a necessary “period of transition”. 

Since then, Trump has set tariffs for the rest of the world to 10% and focused on an escalating trade war with Chinese capitalism. China has implemented tariffs of its own. American farmers, who export 19% of their crops to China, will be hit hard. Chinese airlines have been barred from buying Boeing aircraft, leading to 30% losses for the corporation and predictions of job losses in its factories. Currently tariffs sit at 145% on most Chinese imports, and 125% on U.S. imports into China—causing major disruptions in the trade between the two countries except on products like electronics that have been temporarily exempted. Further sharp changes in tariffs can be expected in the next period.

Why Is Trump Doing This?

Starting in the 1980s and 90s, U.S. billionaires and corporations, with policies advanced by the Republicans and Democrats, shut down thousands of American factories and moved production to countries like China where they could pay lower wages and make huge profits. This neoliberal order was imposed upon working people with full force by U.S. capitalism and heavily benefited big businesses and individuals such as Trump and many others who today claim it to be “unfair”. The U.S. went from being the “workshop of the world” to importing the majority of consumer goods from other countries. This helped Chinese capitalism to position itself as a mass producer of cheap goods, threatening to decimate manufacturers of countries from North America to Europe. Trump thinks he can reverse this process and force U.S. manufacturing to move back home, and thereby gain a more decisive economic advantage over China.

Can Tariffs Work?

It’s very unlikely that this works out the way Trump wants. Capitalists who are looking to get rich quick by betting on the stock market would have to shell out billions over years to build factories that can compete with China’s. Furthermore, no one knows what U.S. trade policy will look like two hours from now, much less in four years. Entire industries are not likely to put hundreds of billions on the line if they have no guarantee of what the political situation might look like before their factories are even finished being built. After moving production to the U.S., businesses would have to launch major attacks on the working class to maintain profitability. Our ability to buy goods would then suffer, causing an overall slowdown and crisis.

Who Pays For Tariffs?

Working-class people will pay the price for Trump’s tariffs through price inflation, disruptions to supply chains, and job losses. Core inflation has steadily increased from 2.2% in February 2024 to 3.1% in March 2025. It has since fallen a little but economists predict it will continue to rise. One in six Americans are already “food insecure”, and tariffs are estimated to cost U.S. families an additional $4,600 this year. Meanwhile, it will devastate the economies of countries that depend on exporting to the U.S., resulting in increased suffering, wars and migration on a global level.

Have There Been Job Losses So Far?

Yes, automaker Stellantis announced 900 layoffs at 5 U.S. plants, and Ford is saying layoffs are on the horizon. Manufacturing reports showed over 4,000 workers have been fired from 19 factories in the U.S., and 15 factories have closed altogether. Cleveland-Cliffs mining company has fired 1,200 workers in Michigan and Northern Minnesota citing weak auto demand, and the United Steel Workers union is reporting hundreds of its members have already lost their jobs. 

Are The Democrats Against Tariffs?

Biden maintained all of the tariffs Trump implemented during his first term, and expanded on them. Furthermore, Biden’s “Build Back Better” plan was essentially protectionist in nature. Biden and Trump are both nationalistic, capitalist politicians, but they represent different strategies to bring back the global dominance of the United States. Biden wanted to maintain the old “Western alliance” from the Cold War, which meant fully backing imperialist wars like Ukraine to weaken Russia, one of China’s key allies. Trump sees Russia as a sideshow, and wants to focus U.S. imperialism to confront Chinese imperialism in the Pacific.

Should Labor Support Tariffs?

No, but unfortunately some labor leaders have promoted the idea that American workers and American bosses are on the same side against foreign competitors (namely, China) and that policies protecting the profits of American bosses are good for the U.S. worker. In reality, corporations will use the same “America First” rhetoric to try to force American workers to “sacrifice” and accept low wages to make up for all the money big corporations are spending to reshore production to the U.S. Workers in the U.S. have much more in common with other workers internationally than we do with our exploitative bosses at home.

Shawn Fain, the president of United Auto Workers is one of the most visible labor leaders in the country, with over 400,000 workers under his leadership. Many continue to look to him for action after the UAW’s “stand up” strike against the Big Three automakers. On CNN, he said “tariffs are a tool in the toolbox to get these companies to do the right thing, and the intent behind it is to bring jobs back here. And, you know, invest in the American workers.” Union leaders like Shawn Fain need to use their position to fight for the interests of the whole working class, which means linking the call for good jobs to the fight against deportations, attacks on trans people and imperialist wars. At the same time, Mahmoud Khalil, who was a UAW member when he was a student at Columbia University, was abducted from his home by ICE for the “crime” of protesting against Israel’s decimation of Gaza. 

Unions need to fight back against Trump’s trade war on an independent, working-class basis. If the bosses try to close down a factory, workers should occupy the workplace and run it democratically. Strikes and workplace action will be necessary to prevent layoffs like the ones already announced at Stellantis, which will affect UAW workers. Unions and consumer groups should monitor prices to make sure corporations aren’t price-gouging.

What’s Happening To The Dollar?

The value of the dollar has fallen 10% since Trump escalated the trade war, eroding its position as the global capitalist classes’ reserve currency. This reduces the privileges U.S. capitalism enjoys over other economies, for example, the ability to print more money to stimulate the economy without the same risks of inflation. This has the effect of increasing the cost of the loans both capitalists and governments use to invest in things. Higher interest rates reduce economic activity and thus increase the likelihood of an early recession.

What Is The Deal With The Bond Markets?

Investors typically buy treasury bonds, or government debt, because they are looking for a safe place to stash their money when places like the stock market are too unstable. As investors watch Trump talk about tanking the world economy, they view buying debt from the U.S. government as a riskier investment, and demand higher profits off their investments. Since March, the prices of long-term treasury bonds have decreased to their lowest levels since 2011. This is a sign that investors are losing confidence in the credibility of U.S. capitalism. The market raises bond yields to attract buyers. This makes it harder for the government to spend money to stimulate the economy, meaning recessions get worse and last longer.

Will There Be A Recession?

It’s possible the U.S. economy is already entering a recession, though the dust has not nearly settled from Trump’s trade wars. Trump’s on-again/off-again tariff policy has massively increased insecurity about the future, forcing consumers and businesses to reduce spending and investmentment plans. It has also forced companies to continually reconsider their supply routes, causing economic disruption.

The University of Michigan is one of the leading authorities on tracking “consumer confidence”, and they showed an 11% drop since March. The study showed the lower your income, the more pessimism you’re likely to have about the economy. This is reflected in retail sales being down 1%, and major corporations like Target, Walmart, Delta Airlines, and McDonalds reducing profit forecasts for 2025. Automakers are expecting to see drops of sales in the millions this year.

How Are Rare Earth Metals Relevant To This?

Rare earth metals are needed for vital components in modern electronics, and China controls 85% of global refining capacity. China has threatened to stop the export of these metals. Rare earth metals aren’t actually that rare. They are a byproduct refined from conventional mining, but it’s an incredibly toxic and environmentally destructive process. It’s not possible to “bring back” production, which is why Trump is looking to the Democratic Republic of the Congo and Ukraine as possible alternatives to China. The quest for rare earth metals will drive naked imperialist exploitation all around the world.

What Advantages Does the U.S. Have Over China?

U.S. capitalism has an immense domestic market that can help it better weather trade wars because its economy does not rely as much on exports. The median American spends $44,058 in their domestic economy, while the median Chinese person spends $6,510. U.S. capitalism has the most powerful military in the world, which includes a series of overseas bases. Meanwhile, Chinese capitalism has its own particular crisis. Its smaller domestic market means it relies more on exports than the U.S. There are massive amounts of public debt. There is overproduction—too much stuff and not enough demand for it—leading to falling prices and challenges growing the economy and paying off the debt.

What Advantages Does China Have Over the U.S.?

China is the biggest producer of goods in the world, which includes key components for major U.S. corporations who rely on China in order to make money. The Chinese economy has vast factories and modern infrastructure that can produce goods at low prices, thereby giving Chinese capitalists a competitive advantage. In 2022, there were 607 billionaires in China, second only to the United States. Furthermore, the so-called Chinese Communist Party, actually a capitalist party dominated by billionaires, ruthlessly controls the lives of working-class people in China, who earn poverty wages, often lack healthcare and access to affordable housing. The most advanced microchip foundries in the world are in Taiwan, 90 miles off the coast of mainland China. Even a slight disruption to these foundries would be a blow to the fragile U.S. economy.

What Happened During the Last Major Trade War?

During the Great Depression, the US passed the Smoot-Hawley Act, which significantly raised tariffs on foreign imports. In the early 1930s, U.S. tariffs stood at 40%. Other countries retaliated, worsening the Great Depression. This ramping up of national conflicts, and the desperate conditions created by the depression, paved the way for World War II. The German ruling class turned to Hitler in an attempt to save German capitalism in the midst of the economic collapse and after repeated attempts at socialist revolution by the working class. In 1931, the British ruling class launched “imperial preference,” a free-trade agreement only between its current and former colonies. The Dutch ruling class did the same thing in Indonesia and the South Pacific. This restricted the access that Japanese capitalism needed to these raw materials from Dutch colonies. The impact of tariffs was to strengthen the power of warmongers in Japan, leading to Japan’s entry into World War II. 

Is There A Similar Risk Of War Today?

Yes. Trump wants to bring back U.S. imperialism as the dominant capitalist country, especially when it comes to “advanced” production like microchips, AI, and space. China’s leader, Xi Jinping, won’t accept this, and has staked his authoritarian regime on making China the dominant capitalist superpower, with its own imperialist ambitions like the Belt and Road Initiative (BRI). Both imperialist powers have supported militarism and outright wars in Ukraine, the Middle East, and Africa. As history shows, the fight for imperialist global hegemony, which can coincide with intense trade wars, often lead to real wars, especially over situations like Taiwan, which the “west” relies on for microchips but China considers part of its country.

So What’s The Answer, According To Socialists?

When politicians say things like “looking out for America first,” they mean “looking out for the profits of American corporations.” We oppose protectionism and trade wars, which are geared towards protecting U.S. business profits and are a step toward all-out war. But we also oppose free trade deals, which are just another way for corporations in dominant imperialist countries to enrich themselves at the expense of working people around the world and at home. Tariffs and free trade are two sides of the same coin: two tools of the capitalist system which is fundamentally based on exploiting workers and the environment for profit.

Making life better for the vast majority of working people won’t happen through tariffs. As a first step, we need to tax the billionaires and the top 500 corporations to fund good union jobs, free healthcare, and high-quality affordable housing. But we also need an entirely new system to fundamentally fix the problems working people face that Trump falsely claims he’s going to solve. Socialists call for a democratically-planned economy on a global scale, where goods are produced and distributed to meet everyone’s needs rather than to make billionaires richer.