The Point of No Return Seems to Have Been Passed


Intensified Global Trade War, currency war and arms race open a new stage in the U.S.-China Cold War


by Michael Pröbsting, International Secretary of the Revolutionary Communist International Tendency (RCIT), 7 August 2019,




The last few days have seen crucial developments in the world situation that have resulted in a further escalation of the Cold War between the two largest Great Powers – the U.S. and China.


U.S. President Trump announced on 2 August that he will impose a 10% levy on US$300 billion of Chinese imports from the beginning of September. That would mean that Trump has now targeted virtually all of the roughly $550bn in goods America buys from China every year. It marks an abrupt end to a temporary truce announced at the G20 summit in Osaka.


In retaliation Beijing announced that Chinese companies will stop buying US agricultural products and that China will not rule out imposing import tariffs on US farm products that were purchased after 3 August.


More importantly, China’s yuan exchange rate weakened below the psychologically important level of 7 to the US dollar in both onshore and offshore markets. It is the first time that the yuan has dropped below that level since offshore trading started in Hong Kong in 2010, and the lowest in the onshore market since April 2008. Overall, the yuan has lost 5% against the dollar since hitting a high in February of 6.6862 to the dollar. That helps exporters cope with the tariffs of up to 25% imposed by Trump on billions of dollars of Chinese goods.


In response, the Trump Administration formally labelled China a currency manipulator, the first such move since 1994. It will, according to a statement of the Treasury Department led by Steven Mnuchin, ask the International Monetary Fund to “eliminate the unfair competitive advantage created by China’s latest actions”. There can be no doubt these latest developments signal the strong possibility of a currency war with the United States. [1]


These developments sparked panic in the stock markets with losses of 2-4% on most major exchanges in the U.S., Europe, and East Asia within a single day. The S&P 500, a key American stock market index, experienced its biggest one-day percentage decline since December last year, amounting to a $766bn paper loss, according to Refinitiv data. [2]




The currency war: a new stage of the U.S.-China Cold War




Refuting the allegation of being a “currency manipulator”, People’s Daily, the mouthpiece of the Stalinist-capitalist regime in Beijing, accused the US of “deliberately destroying the international order” and holding its own citizens hostage. It warned: “Today some in America are obsessed with American privilege to the point of destroying international rules and the international system … These Americans need to wake up![3]


The currency war is likely to continue. Beijing views it as an effective response to not only counter Trump’s tariffs but to simultaneously drive the internationalization of its currency. The regime’s international mouth piece Global Times stated: “Although China has overtaken the US to become the world's largest trading nation, the share of the yuan in global central bank reserves was only 1.84 percent in the second quarter of 2018, as the US dollar remains the major global reserve currency. China clearly wants the yuan to play a bigger global role, but the US sees a threat from the yuan's internationalization. The ongoing trade war is prompting China to make strategic adjustments for a possible decoupling of its economy from the US. In that scenario, China is likely to reduce its dependence on the US dollar and push the yuan's global use. The process of the yuan's internationalization is likely to trigger more conflicts between Beijing and Washington. If the two countries are destined to come into conflict over the yuan's internationalization, the odds are: the sooner, the better. The yuan's sudden slump against the US dollar on Monday seems to have exceeded US expectations and triggered a hot debate among US observers. This suggests China now has the initiative in the trade war and won't be content to only play defense. [4]


Edward Moya, a senior market analyst at the global forex group OANDA, said: “Continued yuan depreciation should be expected, albeit at a staggered pace. (...) Currency wars are taking center stage … [and] Beijing is likely to tolerate further weakness and we could see another 5% before the end of the year.” [5]




Rising global tensions




All of these developments are taking place against the background of a looming Great Recession and accelerated global tensions. [6] Bloomberg, a mouthpiece of the U.S. monopoly bourgeoisie, reflected a growing sense of nervousness among its class: “The escalating trade war between the U.S. and China is nudging the world economy toward its first recession in a decade with investors demanding politicians and central bankers act fast to change course. [7]


The effects of the Global Trade War are hitting both Great Powers. A bourgeois economist commented about the situation of the U.S. economy: “The trade war evidently has contributed to the sharp slowdown in US economic growth. On Monday the National Association of Purchasing Managers reported the worst print in three years for its widely-followed services gauge. It had reported an even weaker number for manufacturing last week. [8]


The increasing nervousness of the capitalists is reflected, among others, in the rush of investors for the safety of government bonds and the dumping of stocks. As a result the yields of 10-year and 30-year Treasury bonds are dropping to record low levels. At the same time, the “spread between the 2-year Treasury yield and the 10-year yield, a longtime recession gauge, hit a low of 7.4 basis points, its lowest level since June 6, 2007. [9]


The Federal Reserve Bank of St. Louis shows on its website some highly interesting statistics about the development of the business cycle since 1982. According to its data, each time the U.S. economy entered a recession soon after the spread between the yield on the 3-month Treasury bill and that of the 10-year Treasury note turned negative. Currently, this spread is close to -40 basis points! [10]


China’s economy has also taken a hit. While the official growth figures of its economy are still impressive, its GDP growth of 6.2% in the second quarter came in at a 27-year low. Furthermore, the National Bureau of Statistics of China reported last week that manufacturing activity contracted for the third straight month in July. [11]


All this is taking place when the Stalinist-capitalist regime in Beijing faces a massive challenge by popular uprising in Hong Kong which lasts now already for more than two months. [12]


Tensions are not limited to the U.S. and China as there has also been a major escalation of the tensions between two other Asian imperialist states – Japan and South Korea. The conflict between these two major capitalist economies – number three and number eleven in global ranking (in terms of nominal GDP) – will also have major repercussions for the world economy. [13]


Another flashpoint of the world situation is the renewed tensions between India and Pakistan after the ultra-chauvinist Modi government launched a massive attack on the constitutional rights of the Muslim-majority province of Kashmir. [14] A military conflict in South Asia, which is home to about 1.9 billion people or about one fourth of the world's population, would have tremendous consequences for the world situation.


Furthermore, the Trump Administration has scrapped the INF treaty that previously put certain limitations to the arms race. [15] This will, without doubt, provoke retaliatory measures by Russia and China.


In order to increase Washington’s pressure on China, U.S. Defense Secretary Mark Esper said last weekend that the U.S. wanted to deploy midrange conventional missiles in the Asia-Pacific region within months. This is a major threat to China. In response, Beijing warned that all “counter measures” were “on the table” if the US placed intermediate-range ground missiles in the area. Fu Cong, of China’s foreign ministry, warned China’s neighbours, including Japan, South Korea and Australia, not to allow the US deployment in their territory. Fu said: “If the US deploys missiles in this part of the world, at the doorstep of China, China will be forced to take countermeasures.”


Interestingly, Australia, usually one of the most loyal Washington allies, has announced that it would not allow U.S. missiles on its territory. This reflects the decline of U.S. imperialist hegemony and the rising status of China as a new Great Power. [16]


The Cold War between the U.S. and China is also reflected in the fact that, for the first time, Beijing acknowledges the accelerating rivalry between the Great Powers. In the recently published issue of its bi-annual defence white paper, titled “China’s National Defence in the New Era”, the Chinese government states: “International strategic competition is on the rise. The US has adjusted its national security and defense strategies, and adopted unilateral policies. It has provoked and intensified competition among major countries. (…) As the world economic and strategic center continues to shift towards the Asia-Pacific, the region has become a focus of major country competition, bringing uncertainties to regional security. [17]


This is in response to the shift of U.S. military strategy which increasingly focuses on countering the challenge of China and Russia as new Great Powers. [18]




A Cold War that comes at no surprise




Trotsky, Lenin’s most important collaborator in preparing and organizing the October Revolution in 1917 and later the founder of the Fourth International, liked to say: “The strength of Marxism lies in its ability to foretell.[19] Naturally, this presupposes a scientific analysis of world capitalism and its inner contradictions, an analysis that requires regular serious examination and, if necessary, updates and modifications.


The RCIT has worked towards providing such a dynamic analysis. This is outlined in our annual World Perspectives documents as well as various books, pamphlets and essays. We have recognized for some time now the onset decline of U.S. imperialism, the rise of China as a new imperialist power, and the consequential, accelerating Great Power rivalry. [20]


We stated in our program in 2012: “In the period of accelerated decline of capitalism the tensions between the ruling classes and states increase inevitably. If the prey gets smaller, the bandits fight harder for their share. Therefore, it is no wonder that the rivalry between the major imperialist powers exacerbates. The U.S. brace themselves against the end of its absolute hegemony as the imperialist leading power which lasted for more than half a century-long. China has entered the arena as a self-confident new imperialist power and is expanding its influence. The EU is trying hard to become a unified and powerful force, and Russia are trying to increase its share in this geopolitical power struggle. Ultimately, the rivalry between the great powers threatens to lead to a new world war. Albeit this danger is not immediately pending, we experience an enormous increase of imperialist colonial wars and "limited" intervention in the semi-colonial world since a number of years (e.g. in Afghanistan, Iraq, Yemen, Somalia, Libya, etc. from the U.S. and the EU; in Chechnya and Georgia by Russia). This is accompanied by the increase in proxy wars and imperialist militarism and rearmament (especially concerning the technological modernization).[21]


In January 2018, we pointed to the realistic possibility that a trade war could start in 2018 between the U.S. and China which would trigger another recession.” [22] A few months later, at the onset of the Global Trade War, we explained that while short-term compromises are possible, a full-blown conflict is inevitable: “Of course, it is not inevitable that a full-blown Global Trade War will take place in the next few months. As mentioned above, both U.S. as well as Chinese capitalists fear such a development and its consequences for the world economy. (...) For all these reasons, one cannot exclude that Washington and Beijing might find a temporary compromise and delay an all-out global trade war for some time. However, given the fact that warmongering in the Middle East and economic protectionism are essential aspects of Trump’s political project, it is very unlikely that such a compromise could last very long. Despite all the inner contradictions and obstacles, there can be no doubt that militarism and protectionism are the key answers of U.S. imperialism against its decline as the hegemonial global power. This would also be the case if the U.S. would have a less mentally deranged and more perceptive President. For all these reasons, a full-blown Global Trade War is inevitable sooner or later. [23]


Since then we have examined repeatedly the developments of the Global Trade War, its driving forces as well as its perspectives. [24]


More and more serious bourgeois commentators are resigning themselves to the changes afoot with the view that the Global Trade War has now become the “new normal”. David P. Goldman warned that “the escalating conflict between China and the US will likely be long and debilitating.” [25] Gordon Watts noted that barring a U-turn, the world’s two largest economies appear to be hurtling down a road to financial mayhem with the global economy held hostage in the back seat.” [26]


A recent editorial of the British Guardian addresses this directly. It reflects the increasing nervousness of a bourgeoisie that continues to be haunted by the catastrophes of 20th Century capitalism.


There is something eerily reminiscent of the summer of 1914 about the state of US-China relations. Neither side wants a trade war. Both countries would be damaged by a trade war. But step-by-step a trade war comes closer. The latest US tariffs come into force in less than four weeks’ time. Without question these are the most crucial weeks for the global trading system since the 1930s. If Mr Trump and China’s president, Xi Jinping, miscalculate, as all the signs suggest that they might, the upshot will be a full-blown trade and currency war that will shred business confidence, close factories and increase unemployment.” [27]


Such comments reflect the most farsighted bourgeois thinkers that are beginning to grasp the threatening outlines of a plunging decline of the capitalist political and economic order.








The Cold War between the U.S. and China confirms once more our thesis that the Great Power rivalry is one of the most important features of the present historic period that began in 2008. [28] We repeat, the precondition for a correct understanding of world developments lies in a recognition of the imperialist nature, not only of the old powers – the U.S., Western Europe and Japan – but also of the emerging imperialist powers, China and Russia.


Only on the basis of such a Marxist understanding is it possible to take a consistent revolutionary and anti-imperialist stance in emerging conflicts like the Global Trade War. This means a position of consistently opposing all imperialist powers and intransigently fighting all expressions of national chauvinism and militarism. In our “Six Points for a Platform of Revolutionary Unity Today” we have summarized the positions that we believe offer the only legitimate stance for Marxists:


It is only possible to understand the driving dynamic of the present period of capitalist crisis and to take a correct position if one recognizes the imperialist character not only of the US, EU and Japan but also of the new emerging powers, Russia and China. Only on such a basis is it possible to arrive at the only correct, anti-imperialist program on this issue – proletarian internationalism and revolutionary defeatism, i.e., the perspective of consistent struggle of the working class independent of and against all imperialist powers. This means that revolutionaries refuse to lend support to any Great Power in inter-imperialist conflicts under the slogan ‘The main enemy is at home! [29]


The strength of the methodology of the RCIT lies in this, that its program and prognoses are capable of withstanding the test of great events. The present Global Trade War and the emerging Cold War between the U.S. and China demonstrate the superiority of the Marxist method.


We call all those who share such a strategic outlook to join us in building a Revolutionary World Party fighting for a socialist future that will liberate humanity from the heel of the imperialist powers in both the East and West!






[1] See on the latest developments e.g. Kelly Wang, Douglas Gillison: US designates China a ‘currency manipulator’ as trade war rages, 2019-08-06; Mark Magnier, Owen Churchill: US declaration of China as currency manipulator roils global financial markets from the Americas to Asia, 6 Aug, 2019; Joe McDonald: China’s yuan falls further amid trade war fears, 2019-08-06; Wall St stocks fall as yuan slide inflames US-China 'trade war', 2019-08-06; Li Qiaoyi, Wang Yi, Zhang Hongpei; ‘Currency manipulator’ label of US groundless: analysts, Global Times 2019/8/6;

; Zhou Xin: China blames Donald Trump’s trade war tariff threat as yuan weakens below 7 to the US dollar, South China Morning Post, 5 Aug, 2019; Zhou Xin, Frank Tang: China’s ‘weaponised’ yuan, report of suspended US farm purchases create grim outlook for trade talks, 5 Aug, 2019; Andrea Shalal, Alexandra Alper: Trump hits China with more tariffs, says Xi moving too slowly on trade, August 1, 2019 /

[2] On the stock markets reactions see e.g. Richard Partington: US stocks suffer worst day of year as trade fears spook markets, 5 Aug 2019; Anooja Debnath and Stephen Spratt: Trump's China trade war hits global bond market, Bloomberg, 2019-08-05;

[3] Quoted in Dominic Rushe, Lily Kuo: China accuses US of 'deliberately destroying' world order, 6 Aug 2019

[4] Hu Weijia: Yuan’s trend shows Beijing has initiative in trade war, Global Times 2019/8/6

[5] AFP: Asia markets fall sharply, extending global losses, 06/08/2019,

[6] See on this e.g. RCIT: World Perspectives 2019: Heading Towards a Volcanic Political Eruption. Theses on the World Situation, the Perspectives for Class Struggle and the Tasks of Revolutionaries, 2 March 2019,

[7] Enda Curran and Katia Dmitrieva: World Economy Edges Closer to a Recession as Trade Fears Spread, 7. August 2019,

[8] David P. Goldman: Trade wars part two – the empire strikes back, 2019-08-06

[9] Thomas Franck: 10-year yield drops under 1.6%, 30-year yield nears record low as collapse in rates accelerates, Aug 7 2019

[10] Federal Reserve Bank of St. Louis, 10-Year Treasury Constant Maturity Minus 3-Month Treasury Constant Maturity [T10Y3M], retrieved from FRED, Federal Reserve Bank of St. Louis;, August 7, 2019.

[11] Gordon Watts: US using ‘dirty tactics’ in trade war, 2019-08-06

[12] See e.g. RCIT: China: Solidarity with the General Strike in Hong Kong! For an international solidarity movement as the Stalinist-Capitalist regime in Beijing prepares a brutal crackdown! 01 August 2019,

[13] See on this e.g. Down with the Imperialist Trade War between Japan and South Korea! Down with all chauvinist boycott campaigns! Class War instead of Trade War! Joint Statement of the Revolutionary Communists of South Korea and the RCIT, 19 July 2019,

[14] See on this e.g. RCIT: India: Defend the Kashmiri People against Modi’s “Israel-Style” Attack! India’s ultra-chauvinist BJP government abolishes decades-old autonomy rights of Muslim-majority province, 6 August 2019,; RCIT: India-Pakistan: Defeat the War Mongers! Free Kashmir! 27 February 2019,; Michael Pröbsting: Kashmir: Social-Patriotism among the Indian Left. On the opportunistic adaptation of various “Stalinists”, “Trotskyists” and “Maoists” to the chauvinistic wave in the wake of the latest conflict between India and Pakistan, 02 March 2019,; RWO: Pakistan – Prospects for revolutionary class struggle (2102),; Michael Pröbsting: The China-India Conflict: Its Causes and Consequences. What are the background and the nature of the tensions between China and India in the Sikkim border region? What should be the tactical conclusions for Socialists and Activists of the Liberation Movements? (Chapter V) August 2017, Revolutionary Communism No. 71,

[15] See on this e.g. RCIT: Trump threatens to withdraw from INF Treaty: No to a New Imperialist Arms Race! The Acceleration of Rivalry between the Great Powers Increases the Risks of World War III, 25 October 2018,

[16] On the U.S. announcement to deploy missiles in Asia see e.g. Christopher Bodeen: China vows to counter US deployment of midrange arms in Asia, 2019-08-06; China will not ‘stand idly by’ if US proceeds with Asian missile plans, 6 Aug, 2019; Global Times: Deployment of missiles in Asia will do little to augment US power, 2019/8/5; Yan Yunming: US Indo-Pacific Strategy will lead to chaos, Global Times 2019/8/6

[17] China’s National Defense in the New Era, The State Council Information Office of the People’s Republic of China, July 2019, Foreign Languages Press Co. Ltd., Beijing, p. 3 and 4

[18] We have drawn attention to this development in various documents. See, in addition to the RCIT’s World Perspective documents mentioned in this article, our essay Michael Pröbsting and Almedina Gunić: How the Pentagon Views the World Situation. A New Study by the US Military Confirms Marxists' Analysis of the Current Historic Period, 25 July 2017,

[19] Leon Trotsky: The Third International After Lenin. The Draft Program of the Communist International: A Criticism of Fundamentals (1928), Pathfinder Press, New York 1970, p. 198

[20] See on this e.g. our recently published book by Michael Pröbsting: Anti-Imperialism in the Age of Great Power Rivalry. The Factors behind the Accelerating Rivalry between the U.S., China, Russia, EU and Japan. A Critique of the Left’s Analysis and an Outline of the Marxist Perspective, RCIT Books, Vienna 2019. The book can be read online or downloaded for free here: On the RCIT’s analysis of China and Russia as emerging imperialist powers see the literature mentioned in the special sub-section on our website: Concerning China, we refer readers in particular to Michael Pröbsting: The China-India Conflict: Its Causes and Consequences. What are the background and the nature of the tensions between China and India in the Sikkim border region? What should be the tactical conclusions for Socialists and Activists of the Liberation Movements? 18 August 2017, Revolutionary Communism No. 71,; Michael Pröbsting: The China Question and the Marxist Theory of Imperialism, December 2014,; Michael Pröbsting: China‘s transformation into an imperialist power. A study of the economic, political and military aspects of China as a Great Power, in: Revolutionary Communism No. 4, Concerning Russia, we refer readers in particular to Michael Pröbsting: Lenin’s Theory of Imperialism and the Rise of Russia as a Great Power. On the Understanding and Misunderstanding of Today’s Inter-Imperialist Rivalry in the Light of Lenin’s Theory of Imperialism, August 2014,; Michael Pröbsting: Russia as a Great Imperialist Power. The formation of Russian Monopoly Capital and its Empire – A Reply to our Critics, 18 March 2014, Special Issue of Revolutionary Communism No. 21 (March 2014),

[21] RCIT: The Revolutionary Communist Manifesto (2012), p. 61,

[22] Michael Pröbsting: World Perspectives 2018: A World Pregnant with Wars and Popular Uprisings. Theses on the World Situation, the Perspectives for Class Struggle and the Tasks of Revolutionaries, RCIT Books, Vienna 2018,

[23] Michael Pröbsting: The Global Trade War has Begun. What is its Meaning and what should be the Response of Socialists? 13 July 2018,

[24] See e.g. Joint Statement: Global Trade War: No to Great Power Jingoism in West and East! Neither Imperialist Globalization nor Imperialist Protectionism! For International Solidarity and Joint Struggle of the Working Class and Oppressed People! 4 July 2018,; Michael Pröbsting: The CWI and the U.S.-China Cold War, Some Notes on Centrists’ Confusion about the Character of the Global Trade War, 27 May 2019,; Michael Pröbsting: Act Two in the U.S.-China Cold War. Global Trade War: What’s Behind the U.S. Targeting Huawei and What Will Be the Consequences? 24 May 2019,; Michael Pröbsting: The Next Round of Escalation in the Global Trade War. After negotiations ended without results, the U.S. imposes new tariffs on Chinese imports and Beijing retaliates, 13 May 2019,; Michael Pröbsting: The Global Trade War is Escalating. Trump’s new Tariffs on about $200bn worth of Chinese Imports Reflect the Accelerating Rivalry between the Great Powers, 19 September 2018,; Yossi Schwartz: Capitalist Trade and the Looming 3rd World War, 15 July 2018,; Michael Pröbsting: The Global Trade War has Begun. What is its Meaning and what should be the Response of Socialists? 13 July 2018,; Michael Pröbsting: Where Do Socialists Stand in Face of the Looming Global Trade War? A Showcase of the Practical Consequences of the Assessment of the Class Character of the Chinese State, 17 June 2018,; Michael Pröbsting: World Perspectives 2018: A World Pregnant with Wars and Popular Uprisings. Theses on the World Situation, the Perspectives for Class Struggle and the Tasks of Revolutionaries, RCIT Books, Vienna 2018, Our documents on the Global Trade War are collected at a special sub-page on our website:

[25] David P. Goldman: Trade wars part two – the empire strikes back, 2019-08-06

[26] Gordon Watts: US using ‘dirty tactics’ in trade war, 2019-08-06

[27] The Guardian view on the China-US trade wars: the global economy is at risk, 5 Aug 2019

[28] For the RCIT’s analysis of the present historic period see e.g. RCIT: Advancing Counterrevolution and Acceleration of Class Contradictions Mark the Opening of a New Political Phase. Theses on the World Situation, the Perspectives for Class Struggle and the Tasks of Revolutionaries (January 2016), Chapter II,; Michael Pröbsting: The Great Robbery of the South. Continuity and Changes in the Super-Exploitation of the Semi-Colonial World by Monopoly Capital. Consequences for the Marxist Theory of Imperialism (Chapter 14), RCIT Books, Vienna 2013,

[29] Six Points for a Platform of Revolutionary Unity Today. A Proposal from the Revolutionary Communist International Tendency (RCIT), February 2018, See also RCIT: Theses on Revolutionary Defeatism in Imperialist States, 8 September 2018,