Trump’s Tariff Extortion: A Primer

Written by Dae-Han Song (Content Team, ISC)

On April 2nd (Trump’s “liberation day”), after declaring a national emergency, Trump used the International Emergency Powers Act of 1977 to increase tariffs on all US imports by 10%, effective April 5th. On April 9th, Trump declared additional tariffs on 57 countries (including South Korea at 25%). However, when the tariffs destabilized the US stock market (wiping out $10 trillion in equity) and bond markets (raising the cost burden of the US debt), Trump postponed these higher tariffs for 90 days (until July 8th). Furthermore, the tariff on imports from China had been set at 145% (with China retaliating at 125%) but came down to 30% (with China lowering it to 10%). 

Many have called Trump’s policies protectionist, some US unions (the United Auto Workers and the Teamsters) have even supported them. Others are calling for a return to the previous global trading system, stating the negative impact it would have on US consumers and the world economy. How should progressives understand and view this situation? Are Trump’s policies simply US protectionism to re-industrialize? If they are imperialist—burdening US consumers with tariffs and stunting the rising economies of developing countries and others—then should we be calling for their repeal and a return to the previous (neoliberal) global trading system? To understand Trump’s protectionism and how progressives/leftists should respond requires exploring why and how the United States created economic globalization and conceptualize the elements for our alternatives and concrete demands to get there. 

Rejecting Its Own Creation

Trump justifies his tariffs by painting the massive trade deficit as the result of the rest of the world taking advantage of US generosity in buying their exports. Yet, such self-portrayal as victim masks how the US government and its multinational corporations ballooned the trade deficit to create and profit from a global supply chain that exploited cheap labor around the world and sold cheap goods to US consumers. In fact, 37% of Chinese exports to the US are intermediate products used by American firms to be more competitive. For South Korea, 51.2% are intermediate goods. Rather than a hapless victim, the US was the primary architect and builder of the global institutions and norms enabling its corporations to control the commanding heights (design, branding, intellectual property) and most profitable portions of the global supply chain while outsourcing the less profitable (industrial) parts to the rest of the world. 

And, if Trump laments the strength of the US dollar for making American production too expensive, it is this persistently high value—rooted in its “exorbitant privilege” as the world’s reserve currency—that allows the US to spend more than it makes.  Any other country with such a great trade deficit would see a depreciation in its currency, lowering its purchasing power of imports while making its exports cheaper to others. Yet, as the holder of the world’s reserve currency, this corrective market dynamic is not activated. While this contributes to the trade imbalance, it also allows it the privilege to continue buying cheap products and labor from the rest of the world by borrowing and printing dollars, with little economic impact. It also allows it to keep funding its budget deficit while lowering taxes by taking on low-interest debt due to the central role of the US dollar as the world’s reserve currency. In addition, the dollar imbues the US with great geopolitical power by allowing it to surveil and control the world’s financial architecture, including inflicting sanctions.

Multilateralism to Unilateralism

If the world had a moment with multilateral elements towards trade liberalization through the General Agreement Tariffs and Trade and its successor the World Trade Organization, Trump’s tariffs are not an attempt at moving from protectionism. Rather, they are tariff extortion to extract even greater benefits to US Empire. Trump’s goal is not to get rid of free trade, which US multinational corporations depend on. Instead, it is to punish economic rivals (i.e., China) and to extract concessions from vassal states, starting with its closest allies. Through this process, Trump might even achieve symbolic victories—such as forcing allies to move some of their production to the United States—to satisfy his base of disaffected workers. Yet, a wholesale industrialization where the US does its own manufacturing (in either the lower textile production or more advanced electronics production) is impossible within a market framework without exploiting American workers beyond politically tolerable levels. Furthermore, the notion of automation increasing the productivity of American workers to give them decent wages while allowing great profits for corporations has failed enough times (Nike attempted automation in Mexico and gave up after three years, retooling automated production for the annual changes in iPhones would be impractical) to qualify it as wishful thinking. 

Some have postulated that Trump’s goal is to create a “Mar-A-Lago Accord” (to replace the current neoliberal system of floating exchange rates): the US would keep the dollar as the world’s reserve currency, while using currency exchange controls with allies to pressure the latter to appreciate their currencies to favor US exports (much like with Japan during the 1985 Plaza Accords). The system would exclude and target rivals. Such a system would accelerate a transition towards a multipolar world where the US carves out its sphere of influence with its vassal states, while excluding or targeting its rivals. This might be successful in getting its closest allies (e.g., Japan, South Korea) to give into his demands. However, with only 11% of world trade involving the US, it’s unclear how effective Trump’s leverage will be in rewriting the global economic order. For example, after resisting Trump’s efforts with its own retaliatory tariffs, China has won the first battle in the tariff war after Trump lowered tariffs to 30%, with Xi lowering tariffs to 10%.  

Beyond Protectionism and Neoliberalism

While the world should resist and stop Trump’s tariff extortion, the solution must go beyond simply returning to neoliberal globalization. After all, simply because neoliberal globalization benefits domestic multinational corporations does not mean that it will improve the lives of ordinary people. In fact, economic growth based on neoliberal globalization is not guaranteed to trickle down to improvements in ordinary people’s lives. Improving people’s lives requires concrete policies that expand social services and protections. This must be achieved through social mobilization and greater political and democratic power. 

In October 2025, the Asia Pacific Economic Cooperation will hold its leader’s summit in Gyeongju. They will surely come together to find ways to address and respond to Trump’s tariffs. Likely, they will call for open markets, trade liberalization, and investment. In that moment, with the world’s spotlight upon APEC, progressives need to put forth a different vision of a global economy that prioritizes people and the planet over corporate profits.