Why a tariff wall in the US?

What problems does Trump want to solve with tariffs? What is the strategy behind them? How has the strategy worked so far, and what can we expect in the future? The headline could just as well have been “The global economy on the brink of collapse?”. There is a real danger that during the current presidential term in the US, we will experience an economic crisis that will dwarf even the Wall Street crash of 1929. ¹

By Reidar Knutsen

What are the problems Trump wants to solve?

The dollar functions as the world’s reserve currency. The background to this can be found in the Bretton Woods system, which was established at a conference in Bretton Woods, USA, in 1944. The conference was attended by representatives from 44 countries, including the important free countries of Western imperialism, but also the Soviet Union. The latter refused to sign the final agreement because they believed the system was a tool for stock market speculators and not for the working class.

At that time, the US controlled two-thirds of the world’s gold and insisted that the system should be based on the dollar and gold².

Against this backdrop, and given that the US has had the world’s largest economy since the war and the dollar has been a stable currency, the system with the dollar as the reserve currency has functioned until now.  This means that 

• The dollar often serves as a means of payment between countries, even if the US is not involved in the trade
• The world’s central banks hold a significant proportion of their currency reserves in dollars. This enables them to intervene in the currency markets and ensure stability in their own economies
• The dollar is central to global financial markets, including the bond market and bank lending

This system gives the US a number of advantages, but also a couple of disadvantages. We will come back to this, since what Trump is trying to do is to keep the advantages but remove the disadvantages.

The advantages for the US of having the dollar as the world’s reserve currency

The dollar’s role as the world’s reserve currency gives the US a number of advantages. We can summarize these as follows ³:

1. Economic advantages

• Lower borrowing costs: Global demand for US government bonds (USTs) keeps interest rates low, reducing financing costs for the government and private actors.
• Seigniorage revenue: The US can “print” dollars to finance imports and investments without immediate consequences, as the world market absorbs the currency.
• Stable deficit financing: Large global reserves of dollars make it easier to finance trade deficits and budget deficits.

2. Geopolitical advantages

• Financial power: The US can use dollar-dominated systems (such as SWIFT) to impose sanctions (e.g. against Russia or Iran) and enforce foreign policy.
• Security influence: Reserve currency status is linked to US military power, which strengthens alliances (e.g. NATO countries that hold dollar reserves).

3. Trade and market advantages

• Reduced currency risk: US companies often trade in dollars, avoiding exchange fees and volatility.
• Liquidity and stability: Global markets use the US dollar as a reference currency, which simplifies trade and investment.

4. Crisis resilience

• Flight to safety: In times of crisis, investors seek refuge in the dollar and US government bonds, which stabilizes the economy.
• Automatic demand: Even during economic shocks, demand for the dollar as a safe haven is maintained.

In short, there are a number of advantages for the US in the dollar having this status, but there are also a couple of disadvantages:

The disadvantages for the US of the dollar as the world’s reserve currency

The two disadvantages are as follows:

• Overvalued currency: The fact that the dollar is seen as a “safe haven” and that other countries buy dollars as a means of securing their own economies means that the dollar is in high demand, and as long as the US Federal Reserve does not print new dollars, its price will remain high compared to other currencies. A strong dollar hurts US exports and industry (see the “Triffin dilemma,” which we will return to later).
• Dependency: The US must maintain global trust, which limits its political freedom of action (e.g., budget deficits must be kept in check).

The first of these two disadvantages is particularly critical for the US. The Triffin dilemma is as follows:

Global demand for liquidity: In order to support international trade and economic growth, there must be sufficient access to reserve currency (dollars) globally. This requires the country issuing the reserve currency, in this case the US, to supply currency to the rest of the world, often through trade deficits.

Conflict with national interests: Persistent trade deficits can undermine confidence in the stability of the currency and lead to economic challenges for the issuing country, such as inflation or weakened creditworthiness.

The country thus faces a dilemma⁴:​

• If it prioritizes global liquidity: By allowing trade deficits to supply the world with currency, it risks economic instability at home.​
  
• If it prioritizes national economic stability: By restricting currency outflows to avoid deficits, it can create global liquidity shortages and economic turmoil internationally.​
  

This is called the “Triffin dilemma” and illustrates the structural tension between national and international economic goals when a single currency has a dominant global role. One could, of course, solve this dilemma by abolishing the dollar as the world’s reserve currency and switching to another currency or system. This would at least get the US out of this dilemma, but at the same time the US would have to give up all the advantages of the system. Some economists in the US consider the disadvantages to outweigh the advantages and therefore see it as necessary to abolish this system, but for the time being the prevailing line is to keep the dollar as the reserve currency⁵. At the same time, as part of his ‘America first’ motto, he wants to prioritize national economic stability and has gone to battle to combat the trade deficit. 

Trump seems to believe that he can both eliminate the trade deficit and maintain the dollar as the world’s reserve currency. In reality, he has so far prioritized the fight against the trade deficit by imposing high tariffs on the rest of the world. The belief in tariffs as a tool is nothing new on Trump’s part. During his first term as president, he increased tariffs, but at that time they were more limited in terms of which goods were affected. These tariffs were largely continued by the Biden administration, and an increase in certain tariffs was also considered ⁶. 

Tariffs are an old and effective tool for protecting domestic industries from foreign competition. In most cases, they have been crucial in enabling countries to build up their own industries. Since World War II, the US has been at the forefront of efforts to abolish tariffs internationally and has used both soft and hard measures to abolish tariffs in other countries. ⁷.  

Globalization

A strong labor movement, combined with the communist threat, forced the bourgeoisie in the imperialist Western countries to accommodate their domestic working class in order to prevent revolution and social unrest. The result was better living conditions for the working class in these countries and increased wage costs for the capitalists. The eternal pursuit of maximum profit, which is a fundamental component of capitalism, led the capitalists to move production to so-called “low-cost countries,” i.e., countries where wages were low. In this way, they could increase the exploitation of the working class by exploiting workers in other countries. The ruling ideology of the bourgeoisie at this time was global free trade. The bourgeoisie wanted to free itself from barriers and obstacles between countries and nations so that they could freely exploit workers from all over the world. If workers in one country organized and demanded better wages, vacations, shorter working days, protection against accidents at work, etc., production could be moved to another country. Often, the threat of this was enough to dampen the workers’ fighting spirit, but in many cases production was also moved around between countries in East Asia. In the beginning, goods were largely produced in Hong Kong, Taiwan, Japan, and South Korea, but later much of the production was moved to China. Today, around 30% of the world’s industrial production takes place in China ⁸, making China by far the world’s largest industrial nation. China’s share is expected to increase further in the future. The United Nations Industrial Development Organization (UNIDO) has estimated that China will account for 45% of global industrial production in 2030, while the US will account for only 11%⁹.

Globalization has been a blessing for the world’s largest capitalists and for capitalism as a system. Through increased foreign trade, large companies have been able to continue to grow. Markets have expanded from national and regional markets such as the EU (formerly the “EC” and “EEC”) to a global world market. At the same time, access to cheap labor has increased. This has created growth and secured profits for the capitalists. But globalization has not only been a blessing for the capitalists; for many, it has also been a curse. For small and weak capitalists in countries with weak industrial development, globalization has been a disaster. Suddenly, they have had to compete with larger, more mechanized, and professionally run capitalists from other countries, and have succumbed to the competition. For the big American and European capitalists, globalization has been a blessing, but at the same time a curse. The benefits of globalization for them have not come without a downside. A downside that has gradually grown so large that we have now reached a point where globalization has come to an end and we are on our way back to a new form of mercantilism.

Neo-mercantilism

The norwegian encyclopedia “Store Norske Leksikon” (SNL) defines mercantilism as follows:

Mercantilism is the form of economic policy that prevailed in Europe from the mid-1500s to the end of the 1700s. The term is also used to describe the thinking behind the policy, which prioritizes trade surpluses over other economic parameters. ¹⁰

The most famous critic of mercantilism is Adam Smith, who in his magnum opus “The Wealth of Nations” from 1776 presented a comprehensive critique of this political line¹¹. In short, his criticism of mercantilism and his argument for free trade were as follows:

Wealth as money vs. welfare: Mercantilists viewed gold and silver (money) as the most important form of wealth. Smith, on the other hand, argued that true wealth lies in goods and services that increase the welfare of the people.

1. Free trade vs. protectionism: Smith argued for free trade and believed that mercantilist protectionist measures (such as tariff barriers and export subsidies) hinder economic growth by distorting market forces.
2. “Invisible hand”: Smith believed that individuals’ self-interest in a free market would lead to the optimal utilization of resources in society – without the need for government control.
3. Trade is not a zero-sum game: Mercantilists saw trade as a conflict in which one party must lose. Smith showed that voluntary trade is mutually beneficial.
4. Productivity and division of labor: Smith emphasized that the real source of prosperity is the division of labor and increased productivity, not the accumulation of precious metals.

Smith’s criticism laid the foundation for classical liberal economic thinking and arguments against government intervention in the economy. Neomercantilism can be seen as a mixture of Smith’s free trade and mercantilism. In short, neomercantilism differs from mercantilism in the following ways:

Objective: National competitiveness, not just gold reserves

• Classical mercantilism: Focused on accumulating gold and silver through trade surpluses.
• Neo-mercantilism: More concerned with strengthening national economic power, industrial capacity, and technological leadership in a globalized world.

Use of market forces, not just state control

• Smith’s criticism: Mercantilism hinders growth by ignoring market efficiency.
• Neo-mercantilism’s response: Uses a mix of market mechanisms and strategic government intervention (e.g., subsidies to key industries, research support).

Trade as competition, but not necessarily a zero-sum game

• Classical mercantilism: Saw trade as a contest in which one country’s gain was another’s loss.
• Neo-mercantilism: Accepts that global trade can be mutually beneficial, but emphasizes ensuring that one’s own nation does not become dependent or vulnerable.

Focus on high-tech industries, not just raw materials

• Neo-mercantilism: Desire to dominate future industries (semiconductors, AI, green technology) rather than simply restricting imports of goods.

Use of indirect instruments, not just tariff barriers

• Classical mercantilism: Used direct tariffs and export restrictions.
• Neo-mercantilism: Uses more sophisticated instruments such as:
  • Currency manipulation (to make exports more competitive).
  • National security justifications for trade restrictions (e.g., Huawei ban in the US).
  • Public-private partnerships to strengthen key industries (e.g. the EU’s focus on battery production).

Conclusion

Neo-mercantilism is more nuanced and flexible than the old version. It incorporates some of Smith’s criticisms by avoiding extreme protectionism, but retains a strategic role for the state in ensuring national economic strength in global competition. Countries such as China, the US (under its “America First” policy) and the EU (with its industrial support) practice variants of neomercantilist thinking. For a more comprehensive analysis of neomercantilism, I recommend: Neomercantilism, the U.S. Election, and Debates Among the Bourgeoisie.

The US’s galloping debt

The US (unlike, for example, its main competitor China) consumes more than it produces. Part of this is financed by the rest of the world, which holds large amounts of dollars that are falling in value due to inflation. Nevertheless, this is not enough to prevent the annual budget deficit measured against GDP from continuing to rise. In 1980, debt was 34.56% of GDP, in 2000 it was 58.37%, and today it is 122.68% of GDP^{12 13}. The budget deficit is mainly financed through loans (i.e. the sale of government bonds). As mentioned earlier, US government bonds play a central role in the global economy, and it is necessary that an ever-increasing amount of these bonds remain in circulation. However, for this system to work, there must be confidence that government bonds can be redeemed as agreed. In other words, the US government must repay its debt as agreed. So far, these bonds have been considered among the safest investments one can make, and interest rates have therefore been low. Especially in times of economic turmoil, many have fled to the dollar, and interest rates have therefore been particularly low, just when the US government has needed extra money to stimulate the economy. If confidence in the US government’s ability to pay its debts declines, interest rates on new bonds will rise, as creditors will demand risk premiums on their investments. Interest rates on US debt have risen recently compared with previous decades. This, combined with the rapid increase in debt, has led to steadily rising interest expenses, which are now the second largest item of expenditure for the US government¹⁴. Even a small increase in interest rates will have a significant impact.

The current interest rate is 4.25–4.50%. Even if the interest rate only increases by 2%, this will mean increased interest expenses of USD 278 billion per year. The highest interest rate the US has ever had was in March 1980, when it was 20%. If interest rates reach this level again, annual interest expenses will be USD 2.78 trillion. By comparison, the total budget for the US government for 2025 is USD 7–7.3 trillion¹⁵, while revenues are estimated at only USD 5.2 trillion¹⁶. In other words, there will already be a deficit of approximately 1.9 trillion¹⁷. Most (53.5%) of the government’s revenue at a 20% interest rate will go to pay the interest on the loan. If the market eventually considers it likely that the US government will not pay the debt, the interest rate will rise well above 20%. It goes without saying that this is not a sustainable development.

Trump 2.0

It was expected that Trump’s second term would be like an anabolic version of his first. Despite this, most people were probably surprised by the amount of steroids the new administration had pumped itself full of before it started changing government policy and administration. In the economic sphere, Trump has created an economic council, led by Stephen Miran. Shortly before Miran was appointed chairman of the council, he wrote an essay entitled “A User’s Guide to Restructuring the Global Trading System.” https://www.wita.org/atp-research/restructuring-global-trading-system/ ). The essay takes Trump’s previous statements and knowledge of his views on economic issues as its starting point and attempts to provide guidance on how this can be implemented. There are many questionable assumptions in this document that are unlikely to be realized. In addition, Trump has not followed the advice particularly well so far. Broadly speaking, the introduction of tariffs has been too rapid, too harsh and too undiplomatic towards allies compared to Mirans’ recommendations.

Too rapid introduction of high tariffs

Miran argues against the sudden introduction of high tariffs, as this will shock the market and lead to great uncertainty. To counteract the shock effect, he argues that tariffs should be introduced gradually and after they have been clearly communicated to the market in advance so that it has time to prepare. This is particularly important, he says, if one opts for 60% tariffs on China and 10% globally. Here, he recommends, for example, gradually increasing tariffs on China by 2% per month until China meets the requirements that have been set for them. He believes that 60% tariffs on China could be reached halfway through the presidential term. He believes it is important that companies are clear in advance about the path for tariffs so that they can adapt. In this way, it will also be possible to prevent market instability by removing uncertainty regarding the implementation of tariffs.

Diplomacy with trading partners

Miran also argues that trading partners must be persuaded to weaken the dollar. Miran refers to the Plaza Accord of 1985, in which the US, France, Germany, Japan, and the UK agreed to weaken the dollar, and the Louvre Accord of 1987, which put an end to such weakening. However, he believes that as things stand (or stood when he wrote this essay), there was little reason for China and the EU to weaken their currencies. He believes that Japan, Mexico, Canada and the UK would be more receptive to this, but that they are not currently large enough economies to achieve the desired result. Miran therefore argues that once tariffs have been set, China and the EU will be more receptive to negotiating a strengthening of the dollar.

A weakening of the dollar would be an advantage for the US export industry, but it would come at the expense of industry in other countries such as the EU and China. China’s economy is largely based on exports, while the EU’s economic growth has been around 1% over the last three years¹⁸. There is therefore reason to expect that both China and the EU will be very uninterested in such a development. For the EU in particular, weakened competitive conditions could be disastrous, since the capitalist economy is dependent on growth, and with only 1% growth, there is not much to go on.

The situation has not been helped by the new Trump 2.0 administration’s contempt and arrogance towards former close allies in Europe and Canada, threatening to annex Greenland and aggressively and arrogantly expressing its desire to incorporate Canada as a state of the US.

Change the terms of US government bonds

A weaker dollar will lead to higher interest rates on US government bonds. This is problematic for the US, which has high debt and a large trade deficit. Miran proposes “restructuring” the loans as part of the solution to this problem. Instead of the current system, which averages 6 years of repayment and around 4% interest, he proposes changing it to 100 years of repayment and 0% interest. In practice, this is stealing other people’s money. Until Trump 2.0, US government bonds were considered virtually risk-free and, according to conservative economic experts, are the backbone of the global economy¹⁹. The fact that Trump has appointed a chief advisor who has recommended something that in practice amounts to not repaying loans to the US government is in itself enough to put the global economy at risk. So far, the market has taken this threat from Miran seriously. If they do, interest rates on US government bonds will skyrocket, as everyone will sell before the change takes effect.

What will happen next?

So far, Trump 2.0 has basically followed Miran’s advice. Where he has not followed the advice, it has been by being too quick and too aggressive. Little has gone according to plan since Trump launched the tariffs on his “freedom day” on April 2, 2025.

• Miran believed that the dollar would rise initially after the tariffs were introduced, which would counteract inflation, and that the result would be that the countries subject to tariffs would pay for the additional tariff costs, not the US. However, the dollar has fallen, and as a result, inflation is particularly high in the US.
• Miran assumed that tariffs would be introduced in a predictable and gradual manner, which would ensure that market unrest would be minimal, but the change has been sudden, violent and unpredictable. For example, Miran recommended that tariffs on China could reach 60% midway through the period, while Trump, at the very beginning of his presidency, has set tariffs at 145%. There has also been a lot of back and forth with the tariffs. They have gone up, then down, then up again (for Mexico and Canada), then down for a number of countries, but only for a 90-day pause. In short, there is a lot of frustration among capitalists around the world who have no idea what the future holds and what kind of tariffs they will have to deal with. As a result, investments are being put on hold in the hope that things will calm down and the necessary predictability will return. 
• Interest rates on US government bonds began to rise, prompting Trump to put tariffs (except for China, and for the others only down to 10%) on a 90-day pause. Significantly higher interest rates on the world’s largest debt are something the US cannot afford.

In the area of tariffs, there are several obstacles ahead, but this will not necessarily result in a major economic crisis, either for the US or the global economy. It would be far more serious if Trump were to go ahead with his plans for the so-called restructuring of US debt. If the plan were implemented, it would have serious consequences for the global economy. Probably at least on a par with the great crash of 1929. The backbone of the global economy (US government bonds as a safe haven) would collapse. Stock prices will plummet, the global economy will collapse, mass unemployment, inflation, public sector cuts, etc. will follow. Conservative economists describe the outlook as bleak as possible (“pitch black” and the like) if the US does not pay its debts²⁰

Most likely, the plan will not be implemented, at least not in the radical form proposed by Miran. And if it is, it will probably be reversed and adjusted when the consequences become clear. But by then it may be too late. Trust in the US will then be irreparable for the foreseeable future. Interest rates on government bonds will skyrocket to a level that will make it impossible for the US to pay the interest, and disaster will be inevitable. Presumably, attempts will be made to patch up the system a little more, rather than defaulting on the debt. But there are limits to how long one can patch up the system to hold together an insoluble contradiction. Sooner or later, the growing US national debt and trade deficit will have to be reversed. It is hardly possible to reverse this trend without major economic turmoil and serious negative consequences for the real economy. Someone has to pay the astronomical bill for US foreign debt. If, in the process, the dollar has to give up its position as the world’s trading currency, the result will in any case be a global economic recession ²¹, why not leave the bill to the creditors? It is therefore not inconceivable that the US government will sooner or later come to the conclusion that it is just as easy to run away from at least large parts of the bill in one way or another.

The new Trump 2.0 administration has thus tried to tackle the fundamental contradiction related to the US trade deficit, but the way this has been done has been extremely clumsy and the goal and strategy have been utopian and doomed to failure. Objectively speaking, the starting point is poor. With a leadership and policy dominated by arrogance, amateurism, and spontaneity, there is every reason to expect that the future will be more turbulent than calm, given the economic developments in the US in particular, but also for the rest of the world.

Imperialism

In 1916, Lenin wrote the book “Imperialism, the Highest Stage of Capitalism” ²² and to incorporate Ukraine into the EU’s internal market. The emerging conflict between the US and China over Taiwan is another example that could potentially develop into open warfare. Although how specific contradictions are resolved is influenced by which political leaders are in power, these conflicts and wars are part of the structure of capitalism, and not a chosen policy that can be discarded by changing the government through bourgeois elections.

It is now over 100 years since Lenin wrote his analysis of imperialism as a new phase of capitalism. As mentioned above, it is easy to see that the analysis is still valid. Nevertheless, there have been significant changes since the situation in 1916. Today, China is an imperialist power on the rise. Ironically, it is the capitalists in the US and Europe who have paved the way for this by investing in China in such a way that this has become possible. Highly educated, disciplined and cheap labor has been attractive to American and European capitalists. Social stability, well-developed infrastructure, access to energy and raw materials have been a self-reinforcing effect that has made China the clearly dominant industrial nation today. While this has given competitive advantages to the capitalists who have moved their production to China, it has been a strategic disadvantage for the capitalist class as a whole based in the US and Europe. In the wake of industrialization driven by Western capitalists, China has built up a powerful national industrial production. 

Who wins the power struggles that constantly arise between the imperialist superpowers is decided by who has the greatest armed potential. The most decisive factor is the industrial and technical capacity of the countries, since modern weapons are produced industrially and in many cases use advanced technology. Since World War II, the US has been the strongest in this area, but in a short time China has overtaken the US in the industrial sector and is close to achieving technological parity. In 2015, China launched the “Made in China 2025” campaign ²³. This has been a strategic initiative to transform the economy from a focus on labor-intensive production of cheap, low-tech products and components to expanding high-tech manufacturing that can rival the US and Europe, as part of a drive to become independent of foreign manufacturers. The US, on the other hand, has not had a similar plan until very recently and is in practice completely dependent on products from China for everything from the production of iPhones to chips, cars, weapons and other products. Even the oil for the US military is transported by Chinese-built cargo ships ²⁴. However, with astronomical debt and a huge budget deficit, it is only a matter of time before this changes unless something drastic happens.

The US – a faltering giant

The US has the world’s largest economy, measured by GDP ²⁵. As can be seen from the above, the economy is based on accumulating ever more debt. The solution is not as simple as the US having to “live within its means” and reduce consumption so that expenditure is in balance with income. There are a number of structural problems associated with the capitalist system that mean there is no easy fix. In fact, it is difficult to imagine a solution that does not result in crisis and/or economic downturn in the global economy. So far, the solution has been to simply push the problem ahead, but the result is that the problems only grow in size. The longer it takes to solve the fundamental problems, the bigger they become. Conservative economists are discussing various solutions, but so far no one has come up with anything credible. The solution currently being tried out by Trump and Miran does not seem to be going according to plan, nor does it seem to be a good plan to begin with. The fact that the Trump administration appears to be ruled by arrogance, amateurism, and spontaneity (including the fact that it consists of sycophants who uncritically respond “yes” to all of Trump’s whims in order to satisfy his ego) does not exactly help the situation. It is therefore likely that the US will fall, and that in its fall it will drag the global economy with it. Ironically, this reduces the room for maneuver of its competitors due to the interconnectedness of the global economy in our era, meaning that they too will fall (who will fall the furthest remains to be seen, but a safe bet might be the US). It is difficult to say exactly when the ticking time bomb in the US will explode, but it is not unlikely that it will happen during Trump’s presidency. It will be interesting to see whether the American people will once again (as before) be satisfied with a few protests and voting for the opposition party, or whether they will begin to question the capitalist system, which is, after all, the root of the problems. If the capitalist system survives when the US falls, it will at least be in a very different world where the US will play a much less prominent role than it has since World War II.

Profit, when the source of profit has dried up

Karl Marx wrote in his magnum opus, Capital, that the source of profit is human labor. He went on to write that as a consequence of competition and the pursuit of maximum profit, production becomes increasingly mechanized. When capitalists invest in new production, a larger share of their investments goes to machines, buildings, raw materials, etc. An ever-smaller share goes to workers’ wages. Since it is only the workers who create value, the result is that the percentage of profit a capitalist receives from his investments steadily decreases. This trend has led to industrial production today being dominated by huge factories that produce for the entire world market. Production is no longer dominated by many smaller factories competing with each other, but perhaps only one, two or three factories producing for the entire world market. This development has made it increasingly difficult for capitalists to invest in production that provides the basis for new growth. The solution has been to try to stimulate the economy, either by making it easier to take out loans, thereby boosting consumption, or by the state taking out large loans and injecting them into the financial sector or business in order to stimulate investment. But all these are attempts to patch up the system without fixing the underlying problems. The result is that the problem is being pushed ahead. The major economic crisis of 2000²⁶ was “solved” by liberalizing the financial sector, which led to people taking on higher levels of debt. It was precisely this increase in private household debt, primarily for the purchase of homes, that led to the so-called “subprime crisis” in 2008²⁷. The reason for this was that loans were granted to private individuals without checking too closely whether they could repay them, as the lenders simply sold the loans on and thus did not bear the risk. The crisis in 2008 was “resolved” by governments taking out large loans that were used to rescue or stimulate the financial system. For the US, this led to the budget deficit jumping from 1.1% in 2007 to 9.8% in 2009. This need to stimulate the economy to prevent recession is the main reason for the astronomical government debt that is spiraling out of control in the US. This is not a situation unique to the US, but because of the US’s special role in the global economy and its economic weight, it is particularly explosive here.

When the US now wants to move industrial production from China to the US as part of “fixing” the problem of growing government debt, this cannot be done overnight. It requires a huge infrastructure with thousands of skilled workers, supply chains, customer agreements, the construction of huge factories, etc. Moreover, China will not sit idly by and simply shut down existing production. Unless the US manages to force the rest of the world to buy from its factories, it will lose the competition on the world market due to higher wages, poorer infrastructure, etc. The result will be that they will only be able to supply the domestic market, and then they will not be able to reap the economies of scale that come with producing for the entire world market. The result is that American industry will become inefficient compared to the rest of the world. European industry, for example, with more selective tariffs than the US currently has for China, could import cheaper components for its production from China and thus manufacture products that it could sell at a lower price than the US would be able to do once the tariff barrier against China has effectively closed off that possibility. Tariff barriers therefore do not solve the problem of falling profit rates.

Secondly, tariffs will not solve the problem of profit rates continuing to decline over time. At best, they may provide a short-term respite. But as we have seen above, this measure will not be able to prevent a global economic crisis.

Conclusion

Contradictions in the capitalist system have been building up. The US national debt is an economic bubble. The same is true of national debt in a number of other countries around the world. Sooner or later, these bubbles will burst. There are many indications that this will happen during the current presidential term in the US. As usual, the burden of the crisis will be shifted onto the people, while the wealthy elite will seek opportunities to profit from the crisis. In the past, it has been possible to patch up the system, for example by taking on government debt. This option will naturally not be available when it is government debt that is the bubble that bursts. In other words, the capitalist economy is likely to experience a bumpy ride in the foreseeable future. Mao said that one must try to turn a bad thing into a good thing. In this case, the crisis will be an opportunity to organize more people who are looking for an alternative to the capitalist system.

1. For more information about this crash, which led to the Great Depression of the 1930s, see: https://en.wikipedia.org/wiki/Great_Depression[↩]
2. https://en.wikipedia.org/wiki/Bretton_Woods_system [↩]
3. This summary is mainly AI-generated using DeepSeek. Other parts of this and the next chapter are also partly AI-generated[↩]
4. https://www.investopedia.com/financial-edge/1011/how-the-triffin-dilemma-affects-currencies. aspx [↩]
5. https://proletarianperspectives.org/neomercantilism-the-u-s-election-and-debates-among-the-bourgeoisie ). Trump does not want to abolish the dollar as the world’s reserve currency and has in fact threatened countries with reprisals if they stop using the dollar in this way((https://www.wita.org/atp-research/restructuring-global-trading-system/[↩]
6. https://www.motor.no/aktuelt/joe-biden-vurderer-okte-tollsatser-pa-kinesiske-elbiler/262223[↩]
7. For example, in the Rambouillet Agreement, which was an agreement made by NATO for peace between Kosovo and Serbia, one of the criteria was that there should be an open market economy in Kosovo: See: https://en.wikipedia.org/wiki/Rambouillet_Agreement and https://archive.ph/20120629190359/www.state.gov/www/regions/eur/ksvo_rambouillet_text.htmlSerbia rejected the agreement and NATO subsequently bombed Serbia into submission[↩]
8. see: https://www.ft. com/content/9aca35b4-b698-41ed-857d-ccb327abce94 and https://en.wikipedia.org/wiki/Manufacturing [↩]
9. https://www.dn.no/kronikk/dyrtiden-starter-na/2-1-1805250 [↩]
10. https://snl.no/merkantilismen [↩]
11. https://snl.no/merkantilismen[↩]
12. [↩]
13. https://www.thebalancemoney.com/us-deficit-by-year-3306306[↩]
14. https://www.pgpf.org/programs-and-projects/fiscal-policy/monthly-interest-tracker-national-debt/[↩]
15. https://www.cbo. gov/publication/61172[↩]
16. https://democrats-budget.house. gov/resources/fact-sheet/president-bidens-2025-budget-builds-our-historic-progress-house-republicans[↩]
17. https://www.crfb.org/press-releases/treasury-11-trillion-deficit-first-five-months-fiscal-year-2025[↩]
18. https://www.wita.org/atp-research/restructuring-global-trading-system/[↩]
19. https://www.tv2.no/nyheter/innenriks/da-vil-hele-verdensokonomien-ga-i-dass/17634550/[↩]
20. https://www.nettavisen. no/okonomi/dyster-spadom-i-debatten-da-blir-det-nattsvart/s/5-95-2305763 [↩]
21. “recession” means economic decline for two or more quarters. Recession normally leads to increased unemployment and rising prices. See more: https://no.wikipedia.org/wiki/Resesjon[↩]
22. https://www.kommunisten. no/2021/08/imperialismen-som-kapitalismens-hoyeste-stadium/ ). In the book, Lenin describes how the world is divided between a handful of capitalist superpowers. The pursuit of maximum profit means that capitalists constantly need more resources and access to larger markets in order to sell their ever-increasing quantities of goods. Around 1900, these great powers had divided the world among themselves. After this, growth for a great power was only possible through redistribution, whereby they brought new areas under their sphere of influence at the expense of others. This often happens through war. Lenin saw the First World War as a typical example of such a “war of redistribution.” Hitler’s talk of colonies in the east as justification for his war of aggression against Poland and the Soviet Union is a more recent example. The current war in Ukraine is also a clear example of Russia wanting control over Ukraine, and in particular the more industrialized and resource-rich eastern region, while the US and the EU want access to rare earth elements ((https://www.dn. no/utenriks/usa/ukraina/russland/geopolitikk-ravarer-og-makt-usa-sikter-seg-inn-pa-ukrainas-sjeldne-mineraler/2-1-1779007[↩]
23. https://en.wikipedia.org/wiki/Made_in_China_2025[↩]
24. https://motparten.no/articles/economy/global/handelskrig/usa_kina/debatt/nrk_2025/kina_vinner.html ). Today, the US is by far the world’s strongest military power. With an annual budget of approximately 3.4% of GDP, US military spending is well above the global average and well above that of its main rival, China, which had a budget of 1.7% of GDP in 2023((https://en.wikipedia.org/wiki/List_of_countries_with_highest_military_expenditures[↩]
25. https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)[↩]
26. https://en.wikipedia.org/wiki/Dot-com_bubble[↩]
27. https://en.wikipedia.org/wiki/Subprime_mortgage_crisis[↩]