The Trump Tariff Challenge and the Rule of Capital
As Canadians sift through the rubble of Trump’s latest salvo and steel themselves for the next in the back-and-forth of the US-Canada trade war, there is increasing interest, especially on the left, in an alternative, independent path for Canada. But in the understandable renewal of interest in attempts like that of the Waffle’s pursuit of left economic nationalism in the NDP of the 1960s and 70s, it is essential as socialists that we do not miss one of the most important lessons that can be gleaned from Trump’s tariff gambit: the aspiring ‘King Donald’ has thus far been constrained by the same forces that limit all liberal democratic governments – the dictatorship of capital.
This does not mean, of course, that we should abandon any attempt to formulate a response, electoral or otherwise. Rather, we must take seriously and renew efforts to build a project premised on transforming the capitalist state to challenge and overcome the rule of capital.
A Crisis in a Time of Catastrophe
The announcement on March 6th that Trump’s beggar-thy-neighbour tariffs on Canada were temporarily paused for a second time had many feeling a mix of relief, anxiety, and confusion on both sides of the border. Given the immediate harm the tariffs could wreak – a recession and possibly stagflation – many in Canada are hoping for a resolution that simply maintains the status quo ante.
Yet, averting a potential disaster only to preserve the catastrophe of the present – grotesque and growing inequality, ecological destruction, and the erosion of already severely limited democratic institutions – is something less than a hollow victory. Further still, any “return to normal” means maintaining Canada’s deep level of integration with an increasingly hostile authoritarian imperial metropole to the south.
As others have pointed out, in the absence of a viable alternative rooted in ‘delinking’ the Canadian economy from the US, the options available are either awful or terrible. Why are we left with such pitiful options? Typical answers might include a lack of “political will” or “cowardly politicians,” but these would miss the much more significant structural constraints we face as leftists and socialists in Canada, and which Trump’s tariff gambit has laid bare.
Trump’s backtracking in February and March illustrates the limits capital poses on governments of liberal democratic states. The first tariff truce was briefly achieved after Trudeau agreed on February 3rd to expand plans to militarize the Canadian border further, adding $200-million to the $1.3-billion he had already committed in December to border security. These monetary commitments, along with the promise to appoint a so-called ‘fentanyl czar’, were minor.
A similar story played out on the US’s southern border, where a former Mexican ambassador to the US characterized what Mexican President Claudia Sheinbaum promised in exchange for the same 30-day reprieve from Trump’s tariffs as “a bit of proverbial kabuki.” The second reprieve in March was won without further concessions from either country and in the absence of retaliatory action from Mexico.
Why would Trump back down twice, thus far, given how little he gained compared to the pain he was prepared to mete out?
The Universal Constraints of Capital
Although Canadian, Mexican, and some American politicians have vociferously objected to the tariffs (and hockey fans in Canada have made their frustrations known), the decisive opposition came from large sections of the essentially borderless class of capital – the dual citizens of Wall and Bay Streets. Or, more accurately, the enfranchised citizens of global capital. In particular, vigorous opposition came from some large manufacturing sectors, such as automakers, and agricultural associations with integrated supply chains and markets in Canada and Mexico, as well as the entrenched forces on Wall Street that were central to global capital.
On February 2nd, two days before the tariffs were set to take effect the first time, the Financial Times ran a story titled, “Donald Trump faces backlash from business as tariffs ignite inflation fears,” detailing the protests of various trade associations to the tariffs. The story also referenced a prescient Goldman Sachs analyst report stating, “‘it is more likely that the tariffs will be temporary’ because of their potential economic impact and the White House setting general conditions for their removal.” On February 1st, the Wall Street Journal’s editorial board referred to the events unfolding as “the dumbest trade war in history.” Trump’s plans for aluminum and steel tariffs, reciprocal tariffs, and other measures against countries that currently restrict access to their markets have led to further rebukes.
Certainly, Trump would have taken notice of the backlash reported in the respective papers of record for the City and Wall Street. Still, the most crucial factor in Trump’s backtracking was likely the reaction of markets. While stock indices fell in February after the announcement of Trump’s plan, they plunged in March when the tariffs came into force, however briefly and partially, signaling capital’s deep disaffection with limiting commodity flows across the US’s northern and southern borders and cutting into profits.
Despite his recent protestations to the contrary, Trump is widely reported to view the stock market as a proxy for a personal approval rating. However, the powerful influence of markets on government policy is far from unique to Trump. History is replete with examples of the constraining power of capital, some more overt than others. Indeed, Trump’s backtracking on the tariffs in the face of a backlash from capital is reminiscent of the recent stifling of another right-wing government’s designs across the Atlantic.
In 2022, the comically short-lived UK Tory government of Liz Truss was highlighted by an audacious attempt to push through £45-billion in tax cuts in its “disastrous mini-budget.” There was significant pushback from the opposition and many in civil society, but what made the difference was the reaction of capital. The pound fell precipitously, and bond markets plunged. Like the repeated stays for the tariffs on Mexico and Canada, Truss’s government was forced to walk back the cuts within weeks of their announcement in the face of objections from critical sections of the capitalist class, especially finance capital. It may seem odd that capital would protest tax cuts, but there was good reason – as holders of large quantities of government bonds, they were concerned about the state’s capacity to service the debt needed to finance the cuts.
It may be surprising when capital constrains the designs of right-wing governments but only when we lose sight of the limits placed on capital itself. Capitalist firms operate and produce materially under definite limits and conditions independent of their will. For capital, barriers to accumulating value realized as profit appear as existential threats. Competition with other firms puts capitalists and firms at constant risk, exerting immense pressure to expand market share and realize ever greater amounts of profit in whatever place in the world market it can. Whether it is protectionist trade measures or the crippling of state capacity to service debt and maintain social order, capital will take measures to defend against policies that cut into its ability to accumulate.
The liberal democratic state’s role as a facilitator of capital accumulation has been essential to the march of capitalism around the globe. Not only does the state serve a legitimating ideological function of market processes, but it also coordinates and mediates between different factions of capital in the expansion of international trade and investments. In times of crisis, where competition between capital and state intensifies, the state takes on an even more prominent role. For instance, to whatever extent the retaliatory tariffs and other measures taken by the Canadian state impacted the Trump Administration’s decision to delay the tariffs, they were effective because they unified and amplified a response from the capitalist class that US tariffs alone could not have.
In the case of the Trump (and Musk) Administration, it is this traditional function of the liberal democratic state that is at risk. The authoritarian concentration of executive power around Trump could significantly undermine the state’s most important functions to coordinate and mitigate threats to the general interest of capital. What becomes of Trump’s tariff gambit in the coming weeks and months is highly uncertain. When the tariffs come into effect, their scope and magnitude, and how long they stay in place will, to a significant extent, depend on capital’s reaction and whether Trump can continue to claim support for his policies as serving the general interests of capital apart from individual companies and sectors of dissent.
Challenges for the Left
The inherent entanglement of the contemporary state with capital and the limits posed by the internationalization of capital in the world market is a significant challenge for the left in Canada and elsewhere.
Despite recent rhetoric from political elites in Canada concerning reorienting the economy away from dependence on the US, market imperatives to maintain the competitiveness of capital means their policy regime will continue to rely on deregulation, tax cuts, and wage suppression to preserve investments and gain access to markets in Europe and elsewhere. This is their only strategy, coupled with a modest industrial policy for the extractive sector and a few high-tech areas. No party in Canada goes beyond this slight adjustment in trade diversification. Nothing like a delinking (let alone socialist) strategy is on offer. To pursue such a strategy, to deepen democratic sovereignty and community controls, is also to confront the state and capital.
Canada’s deep integration with the US, which dates at least to the Auto Pact of 1965 and has grown exponentially since the free trade agreements of the 1980s and 90s, exacerbates the difficulty of charting a distinct path. This is the case not only in an economic sense but also in other areas where the continental economic bloc has sacrificed policy and political autonomy.
For instance, politicians from all major parties, along with the Business Council of Canada and the Fraser Institute, have made the case that in response to Trump, military spending must increase, with social programs sure to be cut to fund it. Yet, despite some discussion of possibly cancelling, at least partially, the F35 fighter jet purchase from US manufacturer Lockheed Martin, no party has thus far broached the subject of the contradictory position of increasing arms spending in response to US aggression while maintaining commitments to the US-dominated NATO, defending Canadian airspace from a military base in Colorado (NORAD), sharing intelligence with the US through Five Eyes, and the deep inter-operability of the Canadian Armed Forces with the US military (especially across the Arctic).
Still, despite the immense obstacles, a challenge to capital’s exploitation and domination is not impossible. However, the task is much greater than reorienting trade away from the US or winning an election as a socialist party. A new enthusiasm for left economic nationalism is occurring (and is hardly limited to Canada) as the dislocations of neoliberal policies and geopolitical rivalries increase. But this development poses more questions than it resolves. There is also the need to consider the obstacles faced in a world market of competitive states and capitals. This includes the need to navigate away from political tendencies that pull toward a compromise with a restructured national capitalist class based on national unity and illusory notions of progressive national competitiveness. This is, ironically, what Trump’s tariff policy has underlined, as well as the obstacle that capital poses to any policy alternatives.
As socialists, we must face up to the task of transforming the Canadian state. This task is premised on economic democracy and building state and working-class capacities for economic planning. As we attempt to formulate a response in the coming months to Trump in the US and Poilievre and Carney in Canada, the need to find a political expression in some new form of socialist party is crucial to any alternate agenda to transform the state and delink from the US, and through this, challenge the constraints posed by capital.
While this is not on the agenda in the current crisis, it is imperative that we prepare for the next. It is, after all, in the decades where nothing happens that the capacity to act in the weeks where decades happen is built. As Leo Panitch, Sam Gindin, and Steve Maher put it in The Socialist Challenge Today, “Getting socialism seriously on the agenda requires addressing the question of political agency more broadly and deeply to include developing the capacity for state transformation so that governments with a socialist project not be stymied by the inherited state apparatus.” •
