Economic warfare, dressed up by US President Donald Trump as a defence of ‘American’ jobs and industry against unfair competition, is now central to the US ruling class’s strategy to arrest China’s ascent to global power status – a historical development which the US has so far proved incapable of stopping by fair means or foul.
Will Jones reports.
Trading blows
In February and March, new tariffs amounting to a 20% tax on imports of all Chinese goods into the US came into effect, the latest escalation of the US’s trade war against its closest economic, technological and military peer. The White House’s public justification for this latest attack was that ‘the extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl, constitutes a national emergency’. This wording is designed to skirt the US’s international agreements under the World Trade Organisation (WTO), which limit discriminatory use of tariffs except to ‘protect essential security interests’. The new tariffs add to those already imposed by Trump’s first administration (2016-2020), as well as a host of more specific sanctions and tariffs directed at China, for example a 15% tariff on clothes and shoes and a 100% tariff on electric vehicles (quadrupled by the previous Biden administration – see FRFI 300).
In a post on his social network Truth Social, Trump claimed: ‘Drugs are still pouring into our Country from Mexico and Canada at very high and unacceptable levels. A large percentage of these Drugs, much of them in the form of Fentanyl, are made in, and supplied by, China’. The US ruling class is blaming foreigners for its home-grown drug addiction epidemic. Wang Yi, China’s Foreign Minister and member of the Political Bureau of the Communist Party of China (CPC) noted that his country was the first in the world to restrict all fentanyl-related substances in 2019 at the behest of the US: ‘In a humanitarian spirit, China has provided various forms of assistance to the United States; the US should not repay kindness with resentment.’
China retaliated on 10 February with a 15% import tax on imports of US coal and liquefied natural gas; 10% tariffs on agricultural machinery, crude oil, and certain vehicles; and export controls on 25 rare earth metals. China further announced on 4 March that it would impose tariffs of up to 15% on imports of US agricultural products. The effect of trade barriers between the world’s two largest economies will be to inflate prices and slow down global economic growth including Chinese economic development and US capital accumulation. Working-class living standards will be sacrificed in Trump’s attempt to protect US finances, promote ‘onshoring’ by US investors, and frustrate Chinese economic and social development.
In March Trump also imposed 25% tariffs on all imports from Canada and Mexico not included in the USMCA free trade agreement, which were about half of Mexico’s US exports last year. In 2023 Mexico overtook China as the chief source of imports into the US, representing 15% of the total. The targeting of Mexican goods is indirectly an attack on China: Chinese components have increasingly been assembled into finished products in other countries including Mexico, before export to the US, a way of circumventing tariffs. Mexico is a weak link in the supply chain since it has an over 1,000% trade deficit with China, is exempted from standard WTO rules, and can legally raise steep tariffs of up to 36% overnight on Chinese goods – should the Mexican state succumb to US pressure.
Outclassed
China is rapidly catching up to the US economically and technologically. The People’s Republic of China (PRC)’s GDP is expected to reach $20tn in 2025, approximately 17% of global GDP. Only the US’s GDP was larger at the end of 2024 at around $30tn, representing over a quarter of global GDP. In other measures, China is ahead: total commercial banking assets in China amounted to $51tn in 2023, compared to the US’s figure of $31tn in the same year. In 2020 China manufactured 35% of all goods in the world, more than the next eight countries combined. In 2023, China exported $3.4tn worth of goods and services, making it the number one exporter in the world, responsible for 11.7% of all exports globally; the US was in second place with 10.2% of global exports. China’s services trade alone exceeded $1tn in 2024 for the first time.
The rollout of China’s 5G infrastructure (the latest generation of mobile communications networks) has dramatically outpaced the US. In 2021, 29% of Chinese mobile connections were via 5G compared to 13% across North America. By 2022, China had deployed 1.4 million 5G base stations, accounting for more than 60% of the world’s total; the US had built around 50,000. That year former Google CEO Eric Schmidt and Harvard Professor Graham Allison warned in an opinion piece for the Wall Street Journal that the US government must prioritise 5G investment, ‘Otherwise, China will own the 5G future.’
The PRC’s technological prowess was underscored in January 2025 when the Chinese technology startup DeepSeek released an AI chat programme which demonstrated similar capabilities to US rival OpenAI’s model ChatGPT, but was developed at a fraction of the cost, and uses fewer hardware resources. AI is seen as the key to reinvigorating the global capitalist economy, with its potential to automate service-sector jobs and increase productivity. US manufacturer Nvidia, whose chipsets are used to run most AI models, saw its share price fall 17% in the aftermath of DeepSeek’s release. US imperialism cannot tolerate such threats to its monopoly power.
Trump changes the game
Donald Trump reportedly acquired his taste for tariffs decades ago (BBC News, 8 February 2025). In 1987, when he was merely a real estate tycoon, Trump spent almost $100,000 on an ‘open letter’ in major US newspapers. In it, he signalled his ambition to put an end to the post-World War II order in which US arms and military might underpinned the stability of the other imperialist powers: ‘the Japanese, unimpeded by the huge costs of defending themselves (as long as the United States will do it for free), have built a strong and vibrant economy with unprecedented surpluses…The world is laughing at America’s politicians as we protect ships we don’t own, carrying oil we don’t need, destined for allies who won’t help’.
From 1965 the US had faced a growing trade deficit with Japan, leading to heavy tariffs and US pressure on Japan to adopt voluntary export restraints. One of Trump’s current advisers on trade, Robert Lighthizer, participated in these negotiations. Despite this pressure, Japan continued to invest strategically in key industries. By 1989, 32 of the world’s top 50 companies were Japanese. US monetary policy in the early 1980s strengthened the dollar, making US products less competitive and resulting in large trade deficits, prompting the US to pressure Japan and other rivals to strengthen their currencies relative to the US dollar through the so-called Plaza and Louvre Accords (1985-7).
By the late 1980s, Japan’s exports to the US declined. Japan’s central bank fought to suppress the value of the yen by encouraging lending, and the Japanese bourgeoisie enjoyed a short-lived speculative property bonanza fuelled by cheap credit. In 1991 the bubble burst, followed by Japan’s ‘lost decades’ of economic stagnation. By 2013, Japan had the highest debt-to-GDP ratio globally, and by 2018, only Toyota remained among the top 50 companies. Japan was brought to heel. The US achieved this result due to Japan’s military and economic dependence on the US, the legacy of its defeat in World War II and subsequent US-enforced ‘pacifism’; meanwhile after the collapse of the socialist bloc in 1989-1991, US monopolies advanced virtually unopposed across the world, backed by US military power.
China’s position today is not the same as Japan’s. The PRC is nuclear-armed and militarily independent – the People’s Liberation Army is the largest in the world with over 2 million active personnel. The Chinese government has also reduced its dependence on buying US debt to save its trade surpluses. In 2013, when Xi Jinping assumed the presidency of China, the value of US treasuries owned by China was over $1.66tn; by 2024 it was reduced to $749bn. More importantly, in the PRC the capitalist class cannot simply run rampant, as it did in Japan.
Class conflict in China
The CPC describes its model as a ‘socialist market economy’, a contradiction in terms. Unlike other post-colonial countries, an independent capitalist class has been allowed to emerge, benefiting from the legacy of the 1949 socialist revolution. Massive state investment and subsidies to strategic industries reduce the costs of inputs and labour for private businesses, but the Chinese bourgeoisie still lacks uncontested political control over the Chinese state, which is governed by the Communist Party. The CPC has almost 100 million members, while its youth wing numbers 75 million. It derives its legitimacy from its ability to defend workers’ interests, but also the ambitions of the developing bourgeoisie and urban middle classes. There have been significant defeats for the Chinese working class under this system, with the reemergence of private healthcare and education being emblematic of deepening inequality from the 1990s. Nonetheless, much of the economy remains under state control: by 2017 roughly 68% of total capital of all enterprises in China was still state-owned.
China is not invulnerable, however. As globalisation retreats, the PRC’s historic strategy of maintaining constant growth of private profits alongside rising working class living standards, the basis of social peace, is threatened by the contradictions inherent in taking the capitalist road.
In the last decade China has experienced a serious slowdown in growth: its average GDP growth rate between 2015-2024 was 5.5%, compared to 10.6% for the period 2005-14. From 2010 domestic investment slowed down resulting in an overaccumulation of money capital. With the state directing the lion’s share of finance to strategic projects both at home and abroad, Chinese capitalists struggled to manage effectively the magnificent profits which had previously sustained their social existence. As in Japan, they found an outlet in housing market speculation, bribing corrupt local bureaucrats to funnel public money into speculative property developments.
While Chinese workers’ incomes have stagnated, a parasitic billionaire class amassed eye-watering wealth. From 2017, the CPC took steps to control the bourgeoisie more tightly under Xi’s ‘common prosperity’ programme. Since 2021, the Chinese state bought up or seized private assets, increasing state-owned companies’ share of market capitalisation by more than a third to almost 50% of the stock market. In the three years to September 2024, the number of billionaires in China fell by 35%, while in the rest of the world the number increased by 12% (Financial Times, 23 September 2024).
In late 2024, anticipating a second Trump presidency, the CPC announced a stimulus package to encourage consumer spending and investment. The government’s target of 5% annual GDP growth in 2024 was achieved, but rather than domestic consumption, this was driven by manufacturing exports as orders from Chinese suppliers were rushed in before Trump assumed office. Future GDP growth looks increasingly fragile.
In these conditions, class conflict in China can only deepen. While the working class will look to the CPC to reconquer the domestic economy in defence of its living standards, the bourgeoisie will seek to build political support for the only capitalist solution, that is an imperialist solution: to redivide the underdeveloped world in favour of Chinese capitalism, conquering sources of super-profits from the US and other rivals through Chinese economic, military and political power.
A future article will study the contest between western imperialism and China across the globe.
FIGHT RACISM! FIGHT IMPERIALISM! 305 April/May 2025
