- by William Briggs
- The Guardian
- Issue #2128
Donald Trump. Credit: open sources
A damoclean sword hangs over the head of the global economy. Its name is Trump. The president-elect’s economic policies of trade war, tariffs, and protectionism will hurt everyone, in every country; including the USA. Entire industries will be decimated. Jobs will be shed. There will be a deadly race to the bottom.
Trump becomes president on 20 January 2025. Economists and governments are scrambling to find some hope in what appears to be a hopeless situation. Australian ‘experts’ point to the significant trade surplus the USA enjoys and hope we might get an exemption. Even if this does come to pass, then it would be cold comfort. The economies that Australia trades with might not be so ‘fortunate.’ Our economy is overwhelmingly dependent on extractive industries. If a trading partner is feeling an economic pinch, then it uses less of the raw materials that Australia provides. The result is a shrinking Australian economy. That means less money for services, fewer jobs, greater hardship for the working class. It means the ugly face of capital laid bare.
While Trump is declaring economic war on all countries, his special target is China. China is the biggest threat to American domination of the global economy. As a special target, the Chinese economy will suffer.
China lives in and with the world capitalist economy. Like other states, it is trying to find buffers, small and large areas of economic relations that can shield it from the worst that is to come, as it faces possible 60 per cent tariffs on all goods exported to the USA. As all countries react, then the cost of doing business everywhere will grow. Profits across the globe will fall. GDP growth will shrink. Free trade between states and blocs will be threatened.
Australia and China are major trading partners. Australia, especially, relies on China to survive as an economy. Any serious contractions in the Chinese economy will spell massive trouble for Australia.
How Australia reacts to the looming crisis of a global trade war will be telling. It can keep its fingers crossed and hope for a magical ‘get-out-of-gaol-free’ card in the form of a US tariff exemption. It might cling to the hope that Australia could export massively into the US economy. This ignores one important fact. Nobody wins in a trade war. The US economy will weaken as well as those it will be fighting. Australian raw materials will find limited markets in a contracting US economy and a shrinking American industrial base.
The idea that the US might rescue Australia is very much a flawed vision.
The logical approach would be to shore up its two-way trade arrangements with China. Feelers have been out by China in this regard. The Chinese ambassador to Australia, Xiao Quian, in a speech marking the 10th anniversary of the Australia-China comprehensive strategic partnership, pointedly remarked that ties were ‘back to the right track’ after the period of a limited trade war with Australia.
The ambassador stressed that a Trump presidency should not damage the relationship between Australia and China.
These are words that make sense but are increasingly difficult ones for Australia to act upon. It is entirely logical to improve relations in all areas with China and with all nations in the region. But, for any economy that is tied into the global capitalist system, and that includes China, there is another logic to be considered. Alliances are often fragile things. Australia, in hitching its wagon to the USA accepted its subservient place in the hierarchy. There was a price to pay but it has meant that 25 per cent of total global flow of capital into Australia in the form of foreign direct investment comes from the USA. It is not a figure that is set in concrete. US politicians have never been shy about reminding us of that fact.
China certainly offers stability as a trading partner but its foreign investment accounts for just four per cent.
Australia needs China and its economy to continue to grow and develop. Trade war threatens this. Important sections of Australian capital know that their futures are in China-Australian relations remaining profitable. At the same time, the Australian capitalist state, and its ruling class are unlikely to risk the acrimony that such a change in line would bring down upon their heads. Such are the contradictions of capitalist relations. The damoclean sword that hangs over the global economy makes those contradictions even sharper.
