Analysis of: Trump’s trade war risks undermining his hopes of hefty US interest rate cuts
The Guardian | February 22, 2026
TL;DR
Trump's tariff war creates a policy trap: protectionism fuels inflation, blocking the rate cuts he demands. The contradictions of nationalist capitalism expose how workers pay for capital's competitive struggles through higher prices and economic instability.
Analytical Focus:Contradictions Material Conditions Historical Context
The article reveals a fundamental contradiction at the heart of Trumpian economic nationalism: the administration's aggressive tariff policy directly undermines its stated goal of achieving lower interest rates. This represents not merely a policy miscalculation but a structural contradiction inherent to nationalist capitalism within a globalized production system. By imposing 15% global tariffs, the administration ensures higher import costs that feed domestic inflation, which in turn forces the Federal Reserve to maintain or raise interest rates—the opposite of Trump's demands. The material dynamics here expose whose interests are actually served by these competing policy imperatives. While tariffs are rhetorically framed as protecting American workers and bringing investment home, their immediate effect is a regressive tax on consumption that falls disproportionately on working-class households who spend larger portions of their income on imported goods. Meanwhile, the push for lower interest rates primarily benefits asset holders and corporations seeking cheaper credit for leveraged buyouts and stock repurchases—not productive investment or job creation. Historically, this situation echoes the contradictions that emerged in earlier phases of American protectionism, but with crucial differences. The article's comparison to Greenspan's 1990s policies illuminates how the current conjuncture differs from the neoliberal expansion period. The global supply chains that emerged over three decades of trade liberalization cannot be easily unwound through tariffs alone. As analyst Dario Perkins notes, the 'crowding in' of private investment that might justify nationalist economic policy remains 'mostly just rhetoric.' The contradiction between Trump's desire for easy monetary policy and his commitment to trade war reveals the limits of nationalist capitalism: you cannot simultaneously restrict the global flows that sustain accumulation while expecting the cheap credit conditions that fueled the previous growth regime.
Class Dynamics
Actors: Trump administration (representing nationalist capital faction), Federal Reserve (institutional capital management), American importers/retailers (commercial capital), Industrial capitalists seeking domestic production, American working class consumers, International exporters
Beneficiaries: Domestic manufacturers competing with imports, Asset holders if rate cuts materialize, State revenues from tariff collection ($110bn), Financial sector through continued policy uncertainty
Harmed Parties: Working-class consumers facing higher prices, Import-dependent businesses and retailers, Workers in export-oriented industries facing retaliation, Workers generally through inflation erosion of wages
The struggle plays out between different fractions of capital: nationalist industrial capital (seeking protection) versus internationally-oriented commercial and financial capital (seeking free trade and cheap credit). The Federal Reserve serves as an institutional mediator between these fractions, ostensibly independent but structurally committed to maintaining conditions for capital accumulation. Workers appear only as passive recipients of policy—as consumers affected by inflation—never as agents with their own interests in this intra-capitalist dispute.
Material Conditions
Economic Factors: $110 billion in tariff revenues extracted from importers, 14.5% effective tariff rate on imports, Rising inflation metrics (Fed's preferred measure increased), Slowing GDP growth in late 2025, Weak job creation
The article reveals a fundamental tension in contemporary capitalist production: decades of globalization created complex international supply chains that cannot be easily 'reshored' through tariff pressure alone. The call to 'make products in the US' confronts the material reality that global production networks developed precisely because they offered capital higher rates of exploitation through wage arbitrage and reduced regulatory burdens. Tariffs attempt to alter the cost calculus without addressing these underlying relations of production.
Resources at Stake: Control over monetary policy (interest rates), Tariff revenues as fiscal resource, Consumer purchasing power, Corporate profit margins on imports, Dollar hegemony and its global role
Historical Context
Precedents: Greenspan's 1990s easy money policies leading to dot-com bubble, Historical American protectionism (Smoot-Hawley era), Stagflation crisis of the 1970s (inflation + stagnation), Denis Healey's inflation-focused British economic policy
This episode represents the contradictions of late neoliberalism encountering nationalist reaction. For three decades, the regime of accumulation relied on global supply chains, cheap imports suppressing wage demands, and easy credit fueling asset inflation. Trump's nationalism attempts to reverse the trade dimension while maintaining easy money—a structural impossibility. The comparison to the 1990s is telling: that era's growth relied on the post-Cold War opening of global markets and new labor reserves. Those conditions cannot be recreated while simultaneously walling off the domestic economy. We are witnessing the crisis of a growth model with no viable successor regime in sight.
Contradictions
Primary: The fundamental contradiction between nationalist protectionism (tariffs) and the monetary conditions (low interest rates) required for continued capital accumulation under the existing growth model. Tariffs cause inflation; inflation prevents rate cuts; rate cuts are necessary for the asset-based growth Trump promises.
Secondary: Contradiction between rhetorical support for workers ('bringing jobs home') and actual policy impact (regressive consumption tax), Contradiction between demanding Fed independence be curtailed while nominating a chair expected to maintain credibility, Contradiction between deregulation agenda (Bessent) and protectionist intervention (tariffs), Contradiction between Supreme Court ruling and executive insistence on tariff authority
These contradictions are unlikely to find stable resolution within current policy parameters. Possible trajectories include: (1) Tariff retreat to reduce inflationary pressure, undermining nationalist credibility; (2) Continued tariff pressure with Fed political subordination, risking dollar crisis and capital flight; (3) Economic downturn that reduces inflation through demand destruction, achieving rate cuts through recession rather than policy success. None represents a coherent accumulation strategy—only different modes of crisis management.
Global Interconnections
This domestic policy struggle connects directly to global dynamics of dollar hegemony and imperial decline. The dollar's role as world reserve currency has allowed the US to run persistent trade deficits while financing them through capital inflows seeking dollar-denominated assets. Trump's tariff policy implicitly challenges this arrangement by seeking to reduce trade deficits—but the interest rate policy he demands depends on continued confidence in dollar assets. The article's mention of 'undermining the US dollar' points to this tension: aggressive nationalism threatens the very imperial privileges that sustain American financial dominance. Moreover, the struggle between Trump and the Fed reflects broader contradictions in managing a declining hegemonic economy. The independence of central banks emerged precisely to insulate monetary policy from democratic pressures—but also from nationalist political pressures that might prioritize domestic employment over international capital flows. Warsh's nomination represents an attempt to resolve this through personnel rather than structural change, but the underlying contradiction between national and international capital remains.
Conclusion
For workers, this intra-capitalist policy dispute offers no positive resolution regardless of outcome. If tariffs hold and inflation rises, real wages erode. If rate cuts come through recession, unemployment rises. If the Fed maintains independence, policy serves international capital; if subordinated to the executive, it serves nationalist capital's speculative interests. The absence of working-class voice in this debate—workers appear only as consumers, never as producers with interests in wages, employment, and working conditions—reveals the fundamental limits of bourgeois economic policy discussion. A genuine working-class politics would reject the false choice between nationalist protectionism and neoliberal free trade, instead demanding international solidarity among workers, public control over investment decisions, and an end to the subordination of monetary policy to capital accumulation rather than human need.
Suggested Reading
- Imperialism, the Highest Stage of Capitalism by V.I. Lenin (1917) Lenin's analysis of inter-imperialist rivalry and the role of finance capital illuminates how tariff wars represent competition between national capitals, with workers bearing the costs of these struggles.
- The Shock Doctrine by Naomi Klein (2007) Klein's examination of how economic crises are manufactured and exploited helps contextualize how policy contradictions may be resolved through crisis measures that further discipline labor.
- Late Capitalism by Ernest Mandel (1972) Mandel's analysis of the contradictions between state intervention and market dynamics in late capitalism directly addresses the tensions between nationalist economic policy and global accumulation imperatives.