Bulent Gokay*
President Trump’s tariff offensive shook global markets by raising tariffs to levels not seen since the Great Depression of 1929-1930. These sweeping tariffs imposed on the entire world, both allies and adversaries, have been regarded as economic madness. These tariffs on all imported goods represent the most significant surge in over 130 years, pushing the effective average tariff rate above 25%. The intention is to reduce or eradicate the U.S. trade deficit and compel foreign manufacturers to invest and sell directly in the U.S. It also aims to enable domestic manufacturers to replace foreign-made goods with U.S. products — thus adhering to the mantra of “Make America Great Again”.
Many mainstream economists and commentators described this as “wildly destructive stupidity,” “astonishing self-harm, ” a lack of “any grown-ups in Trump’s economic team, ” or being “divorced from the reality of trade”. However, attempting to understand tariffs based solely on their immediate economic outcomes is misguided. Even though Trump explained the logic of the tariffs as an attempt to correct the trade imbalance between the US and the rest of the world, White House officials outlined the expected goals behind the tariffs in more detail. They described these goals as concentrating economic forces nationally to “push for structural changes to the global economy to rectify challenges that are difficult to overcome, including high tariffs globally, currency and tax policies, intellectual property theft, and even health and labour standards”. Ultimately, what Trump aims to achieve with this wide range of tariffs is nothing less than a remaking of the global economic order.
The US began experiencing a trade deficit with other countries in the 1980s as US manufacturing moved its operations to the Global South and Canada to capitalise on cheap labour and/or advanced technology. A significant portion of the goods exported to the US originates from US companies operating in Mexico, Canada, and China, among others. Vietnam exports millions of shoes to the US, produced in 59 US-owned Nike factories there. Tesla manufactures most of its electric cars in China. US manufacturing costs at home are considerably higher than those abroad, not only because labour is more expensive but also due to the rapid rise in productivity overseas with new technologies, particularly in China.
The globalisation wave of the 1990s and 2000s ended with the Great Financial Crisis of 2008. During this period, US multinationals shifted more of their production abroad while accumulating profits in specially created tax havens. Capital flows between major economies accelerated, but this also heightened the exploitation of the Global South. In his urgency, Trump seeks to turn back time and restore the ‘golden age’ of US dominance globally – a futile effort to bring back a “rules-based world order” that has long since disappeared.
The primary objective of the current world system is the endless accumulation of capital, regardless of how or where this accumulation occurs. Significant capital accumulation is possible only when one firm or a small group of firms holds a quasi-monopoly over production in the global economy. This quasi-monopoly relies on the active support of one or more states. Over time, however, all such quasi-monopolies tend to self-liquidate, as new producers, drawn by the high profit levels, find ways to enter the market and diminish the degree of monopoly. Increased competition lowers sales prices and the profit level, thereby reducing the potential for substantial capital accumulation.
Similarly, being a hegemonic power in the world system involves achieving a quasi-monopoly on geopolitical power, allowing the state in question to impose its rules and order on the system as a whole, in ways that favour the maximization of capital accumulation for enterprises located within its borders. Attaining the position of hegemonic power is not easy and has only been truly accomplished three times in the last 500 years of the modern world system: by the Dutch Republic in the mid-seventeenth century, by Great Britain in the mid-nineteenth century, and by the United States in the mid-twentieth century.
Over time, states enhance their economic, political, and military positions. They become increasingly reluctant to accept the leadership of the former hegemonic power and begin to challenge the hegemon’s status. This competition leads to upheavals in the global system or economy, resulting in changes that impact the positions of various nations, including core economies. Such global shifts not only influence the standing of core economies but also affect all other economies, regardless of size, which may redefine their roles within the global inter-state system.
Since the early 1990s, there has been a significant power shift towards the Global East, which includes China, India, Russia, Brazil, and several other mid-range emerging powers. With the swift rise of these new powers, the relative influence of the United States and Western European economies is clearly declining.
More than 50 years ago, Organski (1968) warned the United States and its Western allies that China would become the most serious threat to U.S. supremacy. Organski further suggested that an alternative power hierarchy, which may include other medium-sized regional powers, would emerge to challenge the declining dominance of the U.S. and its allies in the world system. Predicting the remarkable rise of China, Organski explained the dynamics of the potential power transition from the United States as a declining hegemon to the People’s Republic of China as a rising challenger in the international system. He predicted that China’s internal development would lead to enormous growth and that its power would eventually surpass that of the Western powers, which would face a serious threat to their supremacy from China. (Organski 1968: 361‒71).
Later, in 1987, at the conclusion of his widely popular study of the global system titled The Rise and Fall of the Great Powers, Paul Kennedy was probably the first observer to measure the actual beginnings of this global shift: “The task facing American statesmen over the next decades … is to recognize that broad trends are under way, and that there is a need to ‘manage’ affairs so that the relative erosion of the United States’ position takes place slowly and smoothly” (Kennedy 1987: 534). Kennedy documented the decline of the US as a global power by comparing indicators of its economic health- like industrialisation levels and real GDP growth- with those of Europe, Russia, and Japan. His findings revealed a shift in global power dynamics over the last 50 years, driven by fundamental structural changes in financial and trading systems. Numerous other writers have examined the evolving balance of global power architecture in a comparable manner.
A year after the 2008 global financial crisis, Kennedy characterised the global shift’s current level as follows:
If one believes in the economists’ theory of ‘convergence’ – that is, the coming closer together of the product and income of companies, regions and countries – then the conclusion is clear: as China, India, South Korea, Brazil, Mexico and Indonesia all ‘catch up,’ the American share of things will relatively shrink. Sooner or later – and this debate really is about ‘sooner’ or ‘later,’ not about ‘if’ – we are going to witness a major shift in the global balances of power” (Kennedy 2009).
Global hegemony is a self-limiting, self-defeating, and temporary condition in international affairs. This is because hegemonic power bears the responsibility of organising the international system, supplying public goods, and intervening when necessary, all of which increase the pressures on and costs for the hegemon. Eventually, the hegemon reaches a point where it becomes over-committed and cannot sustain the cost of maintaining the system any longer. The hegemon prioritises domestic obligations over international commitments or finds it more challenging to adhere to global responsibilities. Either way, hegemony declines and collapses, giving way to emerging chaos until another hegemonic state or a coalition of states rises to restore order. When the hegemony of a major power or global superpower is in its declining phase, it affects the entire world order and leads to instability. This not only affects the realm of economic power; such shifts in economic power will “have a decisive impact on the military and territorial order.” (Kennedy 1987: xxii).
Experts indicate that the US has been experiencing a noticeable decline since the Cold War’s end. While it remains the world’s largest and strongest economic and military power, the nation grapples with significant vulnerabilities, including sluggish economic growth and a prolonged downturn in the processing industry, particularly in innovative technological products. The US’s loss of momentum has persisted for decades, resulting in a decline in its economic strength. Diminished productive capacity and the widening gap between productive and financial accumulation have triggered recurring financial and economic crises throughout the Western world.
By 2020, the US National Intelligence Council (NIC) predicted, China would be an economic powerhouse, vying with the United States for global supremacy. Mapping the Global Future: Report of the National Intelligence Council’s 2020 Project, one of the council’s key reports in December 2004 on the status of the world, stated that China’s economic growth, expanding military capabilities and large population would guarantee its success. “In the same way that commentators refer to the 1900s as the ‘American Century’, the 21st century may be seen as the time when … China … comes into its own”, the council wrote. The report commented that “the world of 2020 will differ markedly from the world of 2004, and in the intervening years the United States will face major international challenges that differ significantly from those we face today” (National Intelligence Council 2004). China is completing a historical cycle by becoming the biggest manufacturing economy again, “just as it was before the voyages of Christopher Columbus and Vasco da Gama. The world will have come full circle” (Allen 2011: 145).
Trump’s so-called madness has a certain rationale. His fervent goal is to maintain the U.S. as the dominant global power, but he prefers not to shoulder the costs and responsibilities of managing the international order, providing public goods, and intervening when necessary. He seeks a return to the Monroe Doctrine. In his address to Congress on December 2, 1823, President James Monroe outlined the U.S. stance on the emerging political landscape in the Americas and Europe’s involvement in the Western Hemisphere. Monroe’s administration warned imperial European powers against meddling in the affairs of newly independent Latin American nations or potential U.S. territories. The intention was clear: the U.S. wanted European colonists to refrain from interfering in Latin America and to let the Western Hemisphere be under U.S. influence.
Today, Trump aims to shift responsibility away from Europe regarding Russia, while empowering Israel to manage the Middle East and confront Iran. This strategy seeks to enable the US to concentrate fully on increasing its efforts to compete against and undermine China. Identified as the primary “national security” challenge, China is viewed by the entire US political landscape as a major hurdle to American global dominance due to its swift advancements in technology. A key goal of the tariff measures is to rally other nations for an economic and military campaign against China. Unfortunately for Trump, it may already be too late to hinder China’s ascent, even with tariff increases as high as 60%.
Both the IMF and the World Bank now assess China as the world’s largest economy according to purchasing power parity (PPP), a measure that adjusts countries’ GDPs based on price differences. (World Bank 2020b). James Kynge writes, in the Financial Times, “Chinese companies are widely recognized as world leaders, or as being at the cutting edge, in 5G telecoms equipment, high-speed rail, high-voltage transmission lines, renewables, new energy vehicles, digital payments, areas of artificial intelligence and other fields” (Kynge 2020).
Macro Polo’s Global AI Talent Tracker identifies China as the country of origin for 29 per cent of the world’s top-tier AI researchers, as compared to 20 per cent from the US. It will not be too long before China’s economy surpasses the US’s by other measures too. The Centre for Economics and Business Research (CEBR) predicts it will happen in 2029 (CEBR 2015). If it does, then all this may dramatically change the context for dealing with global economic challenges.
Trump fully recognises the implications of his policies. The US’s “aggressive unilateralism, ” which emerged in the 1980s under Reagan, has now reached its peak. Trump is not an anomaly; he reflects the true interests of a declining superpower, prepared to instigate a major crisis and extensive devastation worldwide to prevent its inevitable downfall. His ascent to power and the actions that followed are simply a reflection of the profound structural and historical changes taking place in the international political economy and the global power architecture.
References
- Allen, R. (2011). Global Economic History. Oxford: Oxford University Press.
- CEBR (Centre for Economics and Business Research) (2015). “World Economic League Table 2016 Highlights”. https://cebr.com/reports/welt-2016/.
- Kennedy, P. (1987). The Rise and Fall of Great Powers: Economic Change and Military Conflict from 1500 to 2000. New York: Random House.
- Kennedy, P. (2009). “The dollar’s fate”. New York Times, 29 August; http://www.nytimes.com/2009/08/29/opinion/29iht-edkennedy.html.
- Kynge, J. (2020). “China”s tech juggernaut steams ahead”. Financial Times, 25 July.
- Organski, A. (1968). World Politics. Second edition. New York: Knopf.
- World Bank (2020b). “Data catalog: GDP ranking, PPP based”. 1 July; https://data.worldbank.org/data-catalog/GDP-PPP-based-table.
Bulent Gokay is Professor of International Relations at Keele University, UK. He is the author (and co-author) of many books on global politics and human security, including 11 September 2001: War, Terror and Judgement (with R.B.J. Walker, 2003), The New American Imperialism: Bush’s War on Terror and Blood for Oil (with Vassilis Fouskas, 2005), Soviet Eastern Policy and Turkey (2006) and Human Costs of War (with Lily Hamourtziadou, 2024).
