Understanding Apec: Trump’s tariff war

Decades from now, our current moment will appear as a moment of great change: seismic shifts are parting the way to a multi-polar world.

In response, the Trump administration is waging a global tariff war.

As the world finds itself at a crossroads, Apec Business Advisory Council (central to Apec’s pro-corporate globalisation) leaders are demanding a return to the old ‘rules-based-order’.

And while Trump’s tariff extortion must be opposed, simply returning to capitalist globalisation, not only fails to address but also intensifies our crises of climate catastrophes, environmental destruction, political crisis and growing economic inequality and stagnation.

As part of our ongoing series on understanding Apec, this article explores Trump’s tariff war. 

By Weilyn Lau and Jeong-eun Hwang

The confusion that followed the opening salvo to US President Donald Trump’s tariff war revealed the contradictions and tensions between different sectors of capital and economies – within the US and outside of it.

In the first three days, stock prices plummeted, wiping out $10tn from financial markets across the world.

Amidst fears of stalling trade, developing and developed countries scrambled to negotiate with the Trump administration.

Trump’s tariff war has flipped economic orthodoxy on its head, laying bare its most gaping blind spot: economic activity is driven, not by economic formulas, but by power.

Yet, while we must fight Trump’s tariff war, we cannot simply return to the pre-Trump era corporate globalisation that fuelled it and the crises gripping the world. 

Tariff war

To describe the first Trump administration as the result of a wave of populism is to name the chicken without the egg.

Populist movements of the 2010s arrived on the headwinds of economic slowdown and social distress caused by the 2008 financial crisis.

Finding little solution under the Biden administration’s lukewarm re-industrialisation efforts (marked by the ineffective derisking of private investments rather than direct government spending in strategic sectors), Trump’s tariff war promised that domestic decay could be reversed by punishing trading partners, containing economic rivals, exploiting the US dollar, and perhaps most ideologically significant – bringing back manufacturing to the US (by forcing foreign investment) while addressing US debt with tariff revenue.

In addition, Trump is shielding core industries central to production and to the arms industry (eg steel and aluminum, and semiconductors) with prohibitively high tariffs.

To address the economic downturn created by the 2008 global financial crisis, Trump is passing on the burden to the American working class and to everyone else around the world. 

Trump’s tariff war strategy

Trump’s tariff strategy has three components:

• 10% universal tariffs
• reciprocal tariffs on countries with trade surpluses
• prohibitive tariffs on strategic sectors and items.

The 10% universal tariffs were applied on 2 April as part of Trump’s liberation day.

On 9 April, he announced reciprocal tariffs against 57 countries with trade surpluses with the US. For example, 25% tariffs were levied on all products from South Korea (starting from 1 August) due to its $66bn trade surplus. In July, they were negotiated to 15%.

It’s important to note the impact of Trump’s tariff strategy on the psyche of countries. Lee’s ‘pragmatic diplomacy’ was praised for achieving the tariff levels of Japan and the EU.

Yet, such praise masks the reality that, unlike Japan and the EU, South Korea’s 0% tariffs were the result of a free trade agreement with the US that already involved significant Korean concessions (eg adoption of the investor-state dispute system).

In addition, Lee promised $350bn in investment and the purchase of $100bn of US fossil fuels.

Third, strategic items maintained their prohibitive tariffs. The Trump administration maintained 50% tariffs on Korean steel and aluminum and 25% tariffs on Korean automobiles and parts. 

Most egregiously, the US imposed politically motivated tariffs such as 25% tariffs on India for purchasing Russian energy. Despite having a trade deficit with the US, Brazil faced a 50% tariff for prosecuting former President Jair Bolsonaro (an ally of Trump) for plotting a self-coup. 

The bigger picture of Trump’s tariffs is transitioning the US to a multi-polar world by linking “security and economic alliances…to incentivise behaviour that aligns with American interests”. In effect, the strategy is to turn allies into vassal states while isolating adversaries. 

Advocated by Secretary of the Treasury Scott Bessent and chairman of the Council of Economic Advisers Stephen Miran, this ‘Mar-A-Lago’ accord uses political force (like in the 1985 Plaza Accord) to maintain the US dollar as the world’s reserve currency while also depreciating its value (to promote US exports) through political force.

Impact of Trump’s tariffs

When examining the impact of Trump’s tariffs based on the average tariff rate, price sensitivity of exports, and dependence on the US market, the least affected countries will be Western Europe. The most direct and brutal impacts will be on developing countries.

One exceptional case is the land-locked country of Lesotho, targeted for its trade surplus. One of its core industries is manufacturing sportswear for American retailers (eg JC Penney, Walmart and Costco).

Trump’s tariffs completely upended the 2000 African Growth and Opportunity Act that had tariffs exemptions on Lesotho and other African nations.

With nearly half its population living below the poverty line, Lesotho cannot import more US products. As a result of the tariffs, factories laid off employees. With an already high unemployment rate of around 30%, the threat of tariffs has exacerbated the national unemployment troubles, prompting the government to declare a state of disaster in July.

Even with the modified tariff rate of 15%, Trump’s tariffs have already wrecked Lesotho’s economy and immiserated its people. 

Our response to Trump’s tariffs

To fight Trump’s tariff war, we must challenge the narrative surrounding the Trump administration’s tariff war.

The Trump administration frames its tariff negotiations as necessary for correcting the trade deficits accumulated through “the plundering of the US”.

Yet, often tariffs were eliminated through free trade agreements or through larger economic concessions by partner countries (eg South Korea’s adoption of toxic provisions in the Korea-US Free Trade Agreement).

Ultimately, as the US unilaterally imposes tariffs, it destroys the lives not only of its own people but of people worldwide. Such analysis must fuel the struggle against the Trump administration’s tariff war.

While plenty of news coverage elaborates on how Trump’s tariffs are unilateral and unjust, the struggle against his administration remains weak. This is perhaps because the damage is not yet widespread.

Before it does become widespread, we must gather voices from around the world opposing the Trump administration’s unfair policies to fight in solidarity with each other.

Lastly, we must present an economics from the left. Food prices, job losses and economic development are fundamentally political choices. Our movements must fight for dignified lives. Amidst uncertainty, we can lay the grounds to assert a new future. – Globetrotter and the International Strategy Centre (Seoul, South Korea)

Weilyn Lau is a philosophy major at the University of Toronto.

Jeong-eun Hwang is the general secretary of the International Strategy Center and the chair of the International Committee of the Justice Party in the Republic of Korea. 

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