Trump’s Tariff Strategy: Tax Breaks for the Rich & Rising Tensions with China

In a bold move, Donald Trump recently invoked the name of billionaire venture capitalist Marc Andreessen to champion high tariffs as a solution to America’s fiscal woes. He claims that these tariffs could magically eliminate the income tax and help pay down the staggering US public debt, which currently exceeds an eye-popping 120% of GDP. But let’s be real—this assertion is not just misleading; it’s downright ludicrous from a mathematical standpoint.

For Trump, it seems tariffs are merely a convenient ruse to cut taxes for the wealthy, a strategy that will ultimately inflate the US deficit and pile on even more public debt.

Thanks to the controversial tax cuts enacted during his first term, billionaire families in America have benefited tremendously, managing to pay a lower effective tax rate than the bottom half of the population. Meanwhile, our federal deficits skyrocketed from 3.4% of GDP in 2017 to 4.6% by 2019—before exploding to 14.7% in 2020, largely due to pandemic-related stimulus efforts.

Let’s face it: as Trump continues to line the pockets of his fellow billionaires with tax breaks, those tariffs will simply not generate the revenue needed to fill the growing void. A thorough investigation by the Wharton School projects that Trump’s proposed economic policies could lead to a staggering $5.8 trillion increase in the US deficit over the next decade.

But what drives this sudden fascination with tariffs among America’s wealthiest? It’s not just about taxes; it’s about a quest for industrial dominance and economic supremacy.

The reality is that the history these oligarchs like Trump and Andreessen seem to ignore tells a different tale:

Back in the 19th and early 20th centuries, the United States cleverly utilized tariffs as a protective measure for its burgeoning industries. This was a strategic move to build our domestic manufacturing sector, inspired by the economic philosophies of Alexander Hamilton.

Every advanced economy has relied on similar protectionist tactics to get their start—think Great Britain, France, Japan, and South Korea, to name a few. Newly developing economies struggle to compete against established industrial powers, which have the advantage of economies of scale.

Fast forward to the 1940s: the US emerged as the world’s industrial powerhouse, largely unchallenged after WWII left its competitors in ruins. By 1946, US net exports represented 3.2% of GDP and peaked at 4.3% in 1947—a level we haven’t seen since. (Since 1976, the US has run persistent current account deficits, a situation only sustainable due to the dollar’s status as the global reserve currency.)

With little competition in the post-war era, Washington lifted tariffs and championed “free trade.” This move benefitted the US, allowing access to new markets for its abundant exports.

However, after establishing its industrial dominance, the US began to impose “free trade” on its colonies, echoing the actions of the British Empire in the mid-19th century. Once the UK climbed to the top of the industrial ladder, it repealed its protectionist Corn Laws and spread free trade like wildfire.

But then came the monumental shift of the 21st century: China launched an unmatched campaign of economic development. By 2016, the nation had surged past the US as the largest economy on the planet when measured by purchasing power parity.

Even more strikingly, China has asserted itself as the “world’s sole manufacturing superpower,” responsible for a whopping 35% of global output.

In stark contrast, the US has seen a decline in its industrial prowess, primarily due to the deindustrialization and financialization trends that emerged during the neoliberal era. Instead of becoming the world’s manufacturer, the US capitalist class opted to become the world’s banker, profiting from financial and tech oligopolies rather than production.

Manufacturing now makes up a mere 10% of US GDP, while the FIRE sector—finance, insurance, and real estate—accounts for a robust 21%.

Today, American companies struggle to compete against their Chinese counterparts. So how does the US government—essentially the vehicle for monopoly capital—respond? By abandoning decades of “free trade” ideology in favor of a return to protectionism.

During his first term, Trump initiated a trade war with China, a trend that has continued under the Biden administration, which has escalated tariffs even further.

Populists like Trump often use China as a scapegoat for issues that stem from the actions of US oligarchs—like himself and Andreessen—who have grown immensely wealthy due to the very deindustrialization they now bemoan.

Now, they tout tariffs as a cure-all. But let’s be clear: rebuilding the industrial base that has eroded will take years—not a quick fix.

Moreover, the billionaire oligarchs on Wall Street—who maintain close ties with Trump, Andreessen, and other prominent figures—are unlikely to support any significant devaluation of the dollar, which would be essential for re-industrialization and reducing production costs. They prefer a strong dollar to maintain the inflated values of the largest bubble in U.S. capital markets.

Thus, the ultimate outcome is clear: Trump will wield tariffs not to revive manufacturing, but to further justify tax cuts for the wealthy, exacerbating public debt, which will then be used to push for austerity measures and cuts to social spending. Additionally, these tariffs will serve as a political tool in the escalating new cold war with China, providing a distraction from the domestic issues stemming from the failings of the US ruling class.