Tariffs, the stock market and the working class

April 7

Since April 2, the U.S. stock market has lost $6.6 trillion in value. The Dow Jones has fallen 3,910 points — the worst loss since the start of the March 2020 COVID-19 pandemic — and the S&P 500 dropped 6%. Losses continued April 7 with the Dow dropping another 349 points. Stock markets in Asia and Europe have also plunged. 

This fall has been attributed to the extreme tariffs imposed on imports from a long list of countries, announced by President Donald Trump on April 2 — which he misnamed “Liberation Day.” The 10% minimum tariffs on nearly every country in the world — many much higher such as 54% on China, 46% on Vietnam and 20% on European Union countries — go into effect on April 9.

To grasp the relationship between these measures and the ups and downs of stock prices, it’s important to understand what it is that drives the market’s wild fluctuations. 

Under capitalism, workers are not paid the full value of the products or services they create. Part of the value goes to the workers in the form of wages. But they don’t cease working when they produce enough to cover their necessary means of subsistence. They continue working, creating what Karl Marx called “surplus value.” The surplus translates into clear profit for the capitalist owning class — a wealthy class of millionaires and billionaires who perform no productive labor whatsoever.

The market reflects anticipated surplus value. When the bosses anticipate higher profits, stock prices rise. When they foresee lower profits or even a loss, stock prices fall.

Tariffs may cut into profits

What does this have to do with tariffs? A tariff is a type of tax paid when a capitalist imports either finished goods, component parts or raw materials from another country. The tax rate varies depending on which country the product is imported from, but it is an added cost for the capitalist importing the product. 

The fear among capitalists now is that the added cost of new, huge tariffs imposed by Trump will eat into their profit margins. Even if they manage to pass the cost of tariffs to the consumer, higher prices could drive down sales and, by extension, decrease profits. This will affect a wide range of industries from steel and aluminum to electronics and appliances to cars and trucks to agriculture. 

CNN reports that “U.S. President Donald Trump’s decision to impose a colossal set of tariffs on America’s trading partners is tantamount to ‘economic nuclear war,’ according to billionaire hedge fund manager Bill Ackman, who endorsed Trump’s 2024 bid for president.” (April 7)

A tremendous amount of products, parts and materials are imported, because capitalists based in the imperialist countries found it more profitable to take advantage of much lower labor costs in the Global South, fueling globalization. Now tariffs threaten the profits made through superexploitation of workers; that is, the higher profits made because the wages are lower. 

Whether or not the capitalists move production — and with it some jobs — back to the U.S. to avoid tariffs remains to be seen. Right now, companies such as Stellantis, which includes Chrysler, are anticipating a drop in sales and laying off workers.

Of course, there may be more to the latest market crash than tariffs. There could be a recession looming. Recessions and depressions are inevitable under the capitalist mode of production but are more intense in its current late stage.

Either way workers and oppressed people don’t need to feel bad for the wealthy shareholders, whose net worth has fallen. They may be less rich, but they are still rich.

Workers will be hurt

Unfortunately, the falling stock market also affects workers whose pension funds and personal savings are invested in stocks and bonds. When a pension fund loses a lot of value, pensions and/or retiree health care could be cut. Individual retirement accounts (IRAs) typically lose value when the stock market takes a nosedive. This means a double hit for retired workers who are also worried about their Social Security income.

The $6.6 trillion loss on Wall Street represents wealth — speculated surplus value — that was created by the working class. Yet somehow the working class is facing layoffs for those working and loss of income for retired workers.  This is income they worked for all their lives — their personal savings or their pensions. Pensions are legally understood to be deferred wages.

Tariffs are bad for the working class in another way. They set workers in different countries against one another, where they are led to blame each other for “stealing our jobs.” But the only way to win against the ruling class is through a global, united, class-wide movement. What’s needed is international, working-class solidarity.

The rottenness of capitalism knows no bounds. It’s past time to overthrow the class dictatorship of the billionaires. When that happens, the working class can really proclaim “Liberation Day.”