While crisis and recession are common under capitalism, the contours of global capitalism have changed dramatically since 2008. There’s a real danger that in this new era of imperialist conflict, things could spiral completely out of control.
The old neoliberal globalized order is falling apart, but this doesn’t mean it’s being replaced with anything better. Its collapse has produced the reactionary juggernaut of Trumpism. He is escalating a trade war with no end insight, shredding up old alliances, and undermining the “western bloc.” This appears to be dragging the US and world economy into a “Trumpcession,” While crisis and recession are common under capitalism, the contours of global capitalism have changed dramatically since 2008. There’s a real danger that in this new era of imperialist conflict, things could spiral completely out of control.
US Recession Looms
The billionaires who thought Trump’s most important advisor was the stock market have now sobered up. $4 trillion dollars have evaporated from the stock exchange since Trump started raising tariffs, erasing all the gains following the election. Wall Street was further frustrated when Trump seemed to accept a recession as a necessary “period of transition.” They were shocked when their trusted man-on-the-inside, Howard Lutnick, doubled down and called for new measurements of GDP that separated public and private spending to paint a rosy picture, a scheme that can be expected in authoritarian regimes, not the heart of global capitalism.
There are clear signs that a recession is already starting. Consumer spending has seen the biggest drop since the fall of 2021. Retail sales are down 1%. US capitalism relies on its massive domestic market to maintain an advantage in the trade wars. The median American spends $44,058 in the domestic economy, while the median Chinese person spends $6,510. Any threat to consumer spending is a major problem.
Confidence in Trump’s handling of the economy is waning. 62% of Americans view inflation as the most important issue facing the country, and only 31% approve of Trump’s handling of cost of living. Core inflation has steadily increased from 2.2% in February 2024 to 3.1% in February 2025. Some costs have skyrocketed far beyond this. Rising healthcare costs and increased damage from climate-related disasters have raised the price of car insurance 11% over the last year. The price of eggs is up 58%.
There is no end in sight. Trump’s tariffs will make things even worse, especially for working class people. One in six Americans are already “food insecure”, and tariffs on imported produce like tomatoes, cucumbers and bell peppers are expected to raise grocery prices by 3%. Gas prices are expected to rise 20 to 40 cents per gallon. Tariffs on building materials like lumber from Canada and gypsum from Mexico could raise the price of building a home by $10,000. Auto industry analysts are warning of 25% price increases on new cars.
Corporations are sober about what this means for them. Corporations like Target, Walmart and McDonalds are all reducing profit forecasts for 2025. Delta Airlines has slashed its profit forecast in half, and American Airlines revised its forecast from 5% profits down to just breaking even in 2025. Southwest Airlines has dropped its policy of offering a free checked bag (the last remaining major airline to do so). Harvard University, Massachusetts Institute of Technology (MIT), the University of Washington and the University of Pennsylvania, have imposed hiring freezes because of cuts to research funding.
Trump won’t respond well if the Federal Bank holds off on cutting interest rates because of rising inflation, which would be a signal of renewed concerns about the economy. Trump has already taken the unusual step of calling on the Federal Bank to keep cutting interest rates, a move which stimulates the economy, and has installed loyalists in key positions. A clash between Trump and the central bankers overseeing the heart of global capitalism would not instill confidence in capitalists around the world.
“Military Keynesianism” in Europe and Canada
The “American First” doctrine has forced close allies of the United States to reconsider their futures as well, and has temporarily rallied the political establishment. After Trump threatened to make Canada the “51st state”, a wave of Canadian nationalism helped the Liberal Party make a comeback in polls, based on a program to fight Trump’s trade tariffs, Poilievre being not close to Trump and increase defense spending to 2% of GDP by 2030 to “maintain Arctic sovereignty.” They have also doubled infrastructure spending to $125 billion over the next decade.
In Europe, trade wars with Trump and a real war with Putin have pushed the capitalists into action. The Financial Times coined a new term, “military Keynesianism”, to describe the way forward for European capitalism. The EU’s “ReArm Europe” plan aims to mobilize $1,250 billion for defense spending, including $226 billion in loans directly to national governments. The German government passed a plan to spend $773 billion on its war machine, axing debt limits for the military and infrastructure. The Swedish prime minister said “Sweden is not at war. But it is not a state of peace either.”
Working class people will pay for this through the threat of war and cuts to public spending and welfare. Already, Macron’s pledge to increase military spending without raising taxes is raising alarms among French unions. Mark Rutte, the Secretary General of NATO since October 2024 was quoted saying “on average, European countries easily spend up to a quarter of their national income on pensions, health and social security systems, and we need only a small fraction of that money to make defense much stronger.”
All of this has led the Financial Times to point out that it has had a “galvanizing effect on the European Union,” but there are real storm clouds on the horizon. Hungarian Prime Minister Viktor Orbán and Slovakian Prime Minister Robert Fico threatened to veto the military spending bill. Even in powerful economies like Germany and France the political establishment is under threat. The far right AfD party in Germany got its best election results ever, and Macron is hanging on by a thread.
China in Crisis
In 2008, when the United States and Europe slid into deep recession, China’s growth engine helped to prop up global capitalism. For example, from 2009 to 2019, 60% of the world’s concrete was poured in China. China doubled its port capacity and airport capacity during the same period. This spending was wasteful and inefficient. For every 1% increase in debt bonds, Chinese GDP only grew by .04%. During this time, the number of Chinese billionaires tripled.
Chinese capitalism now faces a nightmare scenario. There are massive amounts of public debt. Local governments spend $250 billion on interest on this debt alone — enough to build a submarine fleet to compete with the US. There is overproduction — too much stuff and not enough consumers to buy it — leading to falling prices and challenges growing the economy and paying off the debt. This has led to the “Japanification” of the Chinese economy, with low growth, low interest rates, low inflation and an aging population all happening at once.
In addition, Chinese capitalism now faces a trade war and Trump in the Oval Office. It’s no accident that the first shots of the trade war took place over Huawei’s control of 5G, and has continued into microchips and AI. US capitalism is hoping to strike Chinese capitalism first, while it has advantages like the world’s most powerful military and a relatively strong network of global alliances. Workers have nothing to gain from any of this, especially given the risk of military conflict in the Pacific.
In terms of the global economy, the key point is that China cannot play the same role it played in 2008, when it was one of the only places in the world where economic growth, i.e. profit making, was possible. This was possible because neoliberal globalization was at its peak, and there was an unprecedented level of global cooperation among capitalists. Capitalism will enter the next recession with far less credibility, less money to spend, and fewer political and economic tools to solve the crisis.
Trade Wars and Real Wars
When Trump renamed the tallest mountain in North America from Denali to Mount McKinley, it was part of a conscious effort to revert to an era of US imperialism where naked land grabs, rampant corruption for corporate profits, and militarism were the norm. The billionaires backed him at his Inauguration because they want to get richer and hope his administration’s agenda would provide a more stable base for profit making. But as their stocks tumble they are being reminded that Trump is in it for himself. He is loyal to no-one and remembers 2020 when the whole political establishment, including his own party, abandoned him after losing the election; and he needed to rely on conspiracy-driven zealots and fascist insurrections to try to hold onto power.
So far, Trump’s trade wars are already three times larger than they were at the end of his first term, but it could go much further. When a banking collapse triggered the Great Depression, the US ruling class turned to protectionism. In 1929, tariffs stood at 40%. By 1932, they had risen to 60%. Millions of workers in the US lost their jobs, and unions were losing a thousand members a month. It took the rise of a whole new workers’ movement, which included unemployment struggles, eviction defenses and a new union movement, to improve conditions for workers. Socialists played a key role in these struggles.
The Great Depression was a global phenomenon, and the protectionist policies were contagious. The German ruling class turned to Hitler to save capitalism after repeated attempts at socialist revolution by the working class. In 1931, the British ruling class launched an “imperial preferences,” a free-trade agreement only between its current and former colonies. The Dutch ruling class did the same thing in Indonesia and the South Pacific. Japanese capitalism needed raw materials from the Dutch colonies one way or another, and the tariffs weakened liberal politicians and strengthened warmongers in Japan.
Working class people lose no matter what when it comes to tariffs, trade wars or real wars between capitalist powers. This doesn’t mean socialists support capitalist globalization, or cheerleading projects like the European Union, which is just a different form of exploitation. Genuine peace and cooperation is only possible in socialist economy based on public ownership of wealth resources and key industries, where trade and development are democratically planned for the betterment of people and the planet.
