US Trade War against China and War against Russia


09/04/2018 by socialistfight

By Gerry Downing

Washington Post: Letter to the Editor, 8 March 2018, A U.S.-China trade war will cost Americans plenty; “What we have done is strengthen the Chinese position in the TPP (including the Australian-New Zealand market) while weakening our position throughout the Pacific. This provides the Chinese a dominant position in the market and makes our tariff war with China a losing proposition. It defeats the tariff war’s purpose completely. There is very little incentive for China to change its terrible policies. The Chinese win; we lose”.

Marxists understand that the crisis of global imperialism has its different manifestations in each country and region, but they are all interconnected. And we also understand that the economic crisis of capitalism is the driving force of the crisis and this is reflected dialectically in the crisis of political leadership of imperialism, which in turn exasperates the economic crisis. The global hegemonic imperialist power is the USA and it is beset by that global crisis of the capitalist system most acutely. This is a huge economic and political crisis for them; its profit rates are falling, and it is failing to redress this problem by increasing the exploitation of its own working class sufficiently and imposing its will on regions like the Ukraine, Iraq, Syria or even Libya despite regime change and funding stooge regimes and proxy jihadist armies.

The Offensive against Russia and China

This has led to the election of Donald Trump and the most severe internal crisis of ruling class leadership since the Watergate scandal brought down Nixon on 8 August 1974. Only this time USA imperialism is determined to go to war to finally expunge the Vietnam syndrome caused by their defeat in the consequent liberation of Saigon on 30 April 1975. To solve this crisis, they need to establish global hegemony over not only Syria and Iran but ultimately over Russia and China too. Differences between Trump and the deep state CIA/FBI, allied with the Clinton Democrats and some Republicans, are only about how to conduct that war; once it begins these differences will disappear, with or without Trump.

The fall of East Ghouta is the latest failure of the US in its regime change efforts in Syria and this is what is behind the feverish changes of personnel in the Trump administration to the most warlike hawks and also the extraordinary warmongering by Theresa May over the alleged nerve gas attack by Russia on Sergei Skripal and his daughter, Yulia. Consistent reports are that after East Ghouta is liberated by Assad and Russia the USA and Israel will launch a strike against Damascus, in an attempt to kill Assad and his government and so begin an invasion for regime change. Russia is aware of the plans and has promised retaliation against US forces who have illegally invaded Syria east of the Euphrates and US warships in the Mediterranean and the Gulf.

The New York Times commented that with the dismissal of the more moderate H.R. McMaster and the appointment of the warmongering John Bolton on 21 March, just a week after dismissing the more moderate Rex Tillerson and the appointment of CIA Director Mike Pompeo, Trump now has “the most radically aggressive foreign policy team around the American president in modern memory.” The torture advocate Gina Haspel, Trump’s nomination as the new CIA chief, yet to be approved by Congress, makes up the trio of reaction.

Theresa May’s unexpected success; its economic causes

Theresa May’s unexpected success in isolating Russia and getting many EU and Commonwealth states to expel Russian diplomats can only be understood by postulating the secret intervention of the USA to force compliance. Germany was expected to refuse, given its dependence on Russian gas and oil but the escalating trade war with China and the exemption won, for now, by the EU over the tariff on steel and aluminium was the decisive factor. The UK was granted exemption first, to indicate how to gain favour with Trump. A quick glance at Germany’s trade balances with the USA compared to Russia tells the full story.

Germany’s exports to Russia in 2017 were worth approximately $32 billion and imports were $35, mainly natural gas and crude oil. Germany exported about $100 billion to the US and imported about $35 billion in the same year. The US has had huge trade deficits beginning in 1975. Its total goods and services deficit in 2017 was $566 billion; it imported $2.895 trillion and exported $2.329 trillion in 2017. Other nations with deficits with the USA are China, $375 billion, Canada $18 billion, Mexico $71 billion, Japan $69 billion, and Germany $65 billion. Germany was therefore forced to comply, but Japan did not, given its proximity to and mutual trade relations with China.

Germany’s trade with China in goods and services was $230 billion in 2017, supplying the internal opponents of sanctions on Russia with more ammunition, given the emergence of the Euro-Asian block advocated by Aleksandr Dugin, Putin’s ideologue. Trade between Japan and China is now approximately $25 billion, Japan exports about US$ 8.5 billion and imports about $16.5 billion to and from China, increasing by about 15% in the last year. China is Japan’s second-largest export destination and its largest source of imports. China exports to Russia were about $45 billion last year, and Russian exports the other way are about $42 billion, showing a year-on-year increase of almost 30%. China and Japan are nominally the second and third largest economies in the world, followed by Germany, India, UK, France, Brazil, Italy and Canada in that order. Only China at 6.5% and India, at 7.4% are still growing strongly, the rest are at or near 2% now and future projections are little better.

Germany’s worldwide current account surplus is about $300 billion. It has withstood competition from China far better than the USA, its share of the world’s exports only declined from 11% to 10.4% between 1997 and 2013 whilst the U.S. share fell from 13.7% to 9.5%. The USA is now in third place behind China and Germany. However, US exports represent only a small part of its economy, German exports account for nearly half of its GDP, making it far more vulnerable to a trade war.

Moreover, national statistics from China and other destinations do not reflect the fact that US transnationals export raw materials and parts to China, Mexico and Indonesia, for example, to be assembled there by far cheaper labour and re-exported to the US, contributing vast profits to those US corporations. These do not appear in bald national trade statistics. But that practice does cost jobs, says Trump, “America First, bring home the jobs”, so he has cut corporation tax from 35% to 21% to tempt home those, and the other important service transnationals, located in Ireland and elsewhere for tax avoidance purposes.

From these statistics we can glean that the likely outcome of the increasing trade war by the Trump administration is world war; only such a war will force compliance on Russia and China. Germany, its immediate peripheral states in the EU and Japan very unreliable allies of the USA. And as we have outlined elsewhere, the US military capacity combined with its NATO allies is more than four times greater than the combined military might of China and Russia. That and the other financial and political advantages the US have make it still the world’s hegemonic imperialist power. [1]

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Foreign Ownership of U.S. Debt

As the trade war escalates China has hinted darkly that it has further options in this struggle. They are undoubtedly referring to the amount of US foreign debt China holds. The total U.S. debt is $21 trillion as of December 2017; much of that is domestic but foreign-held debt is a seriously large portion of the total, just over $6 trillion.

As of December 2017, China held the biggest tranche of US foreign debt, $1.2 trillion worth of U.S. Treasury securities, just ahead of Japan of at $1.1 trillion.  Surprisingly Ireland is the third largest holder of US debts, at $326 billion and next is the Cayman Islands at $270 billion, then Luxembourg at $218 billion and Belgium at $119 billion. None of these four are debts held by sovereign governments but are little more than fronts for sovereign wealth and hedge funds and US corporations who did not want to repatriate their profits and suffer the 35% tax rate that applied until Trump reduced it to 21% in December 2017. Brazil, the UK, Switzerland, Hong Kong, Taiwan, Saudi Arabia, and India are other holders of lesser amounts of US Treasury bonds.

Both Japan and China want to keep the value of the dollar higher than the value of their currencies. If they were to begin to sell off that debt their currencies would rise and their exports to the USA would become far more expensive. But Trump’s trade war tariffs are already doing that now to China and the US might struggle to fill that gap if it starts to sell the debts. A war might temporarily instill enough patriotism to get the domestic market to fill the gap, and the Fed could print more but a collapse of the US dollar would be on the cards due to a default, with hyperinflation looming.  And it is doubtful if they could get enough alternative foreign nations to fill the gap. If the US defaulted on its debts it would do immense damage to global trade, but the main domestic victims would be the pension funds of US retirees, which would be wiped out. But if both China and Japan were to begin selling US Treasuries that would surely trigger a default and consequently war.


[1]  See Socialist Fight, 29-12-17, The Hegemonic Domination of US Imperialism,

One thought on “US Trade War against China and War against Russia

  1. Dov Winter says:


    From your own article it is hard to conclude that China is just a semi-colony. The intense competition between the US and China, that in your own words can lead to world-war-three, is not a competition between the biggest imperialist country and a subordinated semi-colony. It is time for SF to accept the reality that China is an imperialist country.

    Also, a third-world-war will not be another world war like the first and the second. It will inevitably transform into a nuclear war, which means the destruction of the planet to the point that many places will be uninhabitable; that is, the human race will retreat into barbarism. That means that the socialist revolution will have to happen before such a nuclear war.


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