U.S. President Donald Trump’s trade war has intensified the crisis in global capitalism and heightened the looming threat of military conflict. In a surprising move, Trump suspended higher tariffs for several countries while increasing the rate on China to 125 percent. 

As of earlier, the Chinese government retaliated against Trump with 84 percent duties on US imports, which will be enforced from Thursday. Trump had implemented 104 percent duties on China from Wednesday—an increase of 50 percent on levies he had already enforced. He had threatened to elevate them to those astonishing levels, unless China pulled back from the retaliatory duties it imposed on US products last week.

The intensification of the trade conflict is sending tremors through an already sluggish and fragile global capitalist economy. One prominent US financier, JP Morgan CEO Jamie Dimon, cautioned that recession is the “probable result”.

Investors were offloading US government bonds—IOUs that nations issue to generate funds—at a rapid pace on Wednesday. Governments issue bonds, pledge to repay the funds in the future, and then pay interest on them until that time.

The offloading of bonds initiates a process that increases the expense of borrowing for the government, elevates interest rates, and drives inflation. And so it has a ripple effect on the real economy and US influence in the world.

China possesses a significant amount of US bonds, and experts are speculating that it might be unloading them. This kind of escalation would push the world closer to military as well as economic conflict between the two nations.

The unrest stems from the crisis of US “hegemony”—its capacity to dominate the globe—and the collapse of neoliberalism. Imperialism is a worldwide system of rival capitalist nations. Since the late 19th century, it has witnessed a merging of economic rivalry between capitalists and geopolitical rivalry between nations.

US imperialism established a liberal capitalist global order after the Second World War in 1945. It contrasted with that of European colonial empires and was centered around open markets and free trade that US companies could control. There was always an economic and military aspect. The US could utilize the International Monetary Fund (IMF) and World Bank, founded in 1944, to extend its influence over adversaries, partners, and weaker countries.

All of this was and continues to be reinforced by military strength, through the NATO war-driven alliance, and hundreds of military installations around the globe.

The Cold War was a period of superpower imperialism between the US and the Soviet Union, which had divided the world into “zones of influence”. This led to the US incorporating the other developed capitalist nations into a unified political alliance, which the world would come to know as the “West”. There was still economic rivalry among Western countries, especially after European nations and Japan rebounded in the 1950s and 60s.

But it didn’t carry the same potential for escalating into military clashes as during earlier stages of imperialism. That’s what occurred when Germany emerged as the primary threat—industrial and military—to the British Empire in the lead-up to the First World War in 1914.

The merging between economic and geopolitical rivalry persisted, but there was a partial separation of the two. What we’re witnessing today is the forceful resurgence of that merger. The world now closely resembles the period before the First World War, when an overextended British imperialism struggled to preserve its dominance.

Today, US imperialism faces challenges to its dominance, primarily from China. Trump’s response is a more “go it alone” strategy to foreign policy compared to other US leaders.
The crisis of US imperialism is connected to the collapse of neoliberalism and free market globalization. And here, Trump sees an opportunity in turning to economic nationalism as the US faces rivalry from other nations, above all, China.

He bets that the US can utilize tariffs to reconstruct a manufacturing sector that has diminished during the neoliberal era. This is a high-risk tactic, and there is a long way to go before the World can discuss a decoupling between the two economies. And that means it is fraught with contradictions, and can foster divisions at the upper echelons of society. The left must capitalize on such divisions to build resistance from below against any efforts to make working-class people bear the burden of the crisis.