Tariffs will pay for tax cuts for the wealthy

Nick Beams

From the start of its tariff war against the rest of the world, the Trump administration, from the president down, had been promoting the Big Lie that its sweeping levies—the highest since the disastrous days of the 1930s—benefit the American population, paid for by foreign countries and corporations.

A shopper compares beef prices at a grocery store in Mount Prospect, Ill., Thursday, July 17, 2025. [AP Photo/Nam Y. Huh]

Trump knows these claims are false and that tariffs are the equivalent of a sales tax on imported goods paid for at the border to the government by the importer and then passed to the final consumer or the company using the goods. If not passed on, either by the importer or the company using the goods, then the tariff is paid for by a lowering of the firm’s profits because its cost structure has been raised.

A report issued by the non-partisan Congressional Budget Office (CBO) last Friday has revealed one of the central mechanisms at work in the tariff war. It is a means by which a domestic tax is levied to pay for the massive tax-cut handouts to the corporations and the ultra-wealthy in Trump’s so-called “big beautiful budget bill.”

The CBO said the tariffs announced so far this year would raise more than $4 trillion in the coming decade and be used to cut government deficits by that amount. It said the tariff would lower the primary deficits by $3.3 trillion and the interest bill by $700 billion.

It has previously estimated that the hit to government revenue from the Trump budget will be $4.1 trillion over the next decade. In other words, in essence the tariffs are an impost on the domestic economy to finance the tax cuts.

The CBO’s estimate of the impact of the budget deficit has been dismissed by the Trump regime, but it eagerly seized on the revenue figures. Trump said it showed he was “right” and tariff revenues “are going to reduce the deficit by numbers far greater that ever expected—unheard of.”

US Treasury Secretary Scott Bessent has said he expects the revenue from tariffs to rise “substantially” from his previous estimates.

“We are going to bring down the deficit to GDP. We’ll start paying down the debt and then at that point that can be used to as an offset to the American people,” he told CNBC.

The tariff hikes have yet to show up fully in consumer inflation data because some firms have taken the decision—at least to this point—not to raise the prices in order to retain revenue and market share. But this situation cannot continue indefinitely, and the tariff hikes are already starting to show up in consumer durables.

In a recent note George Saravelos of Deutsche Bank said: “The top-down macro evidence is clear: Americans are mostly paying for the tariffs. There is likely to be more pressure on US consumer prices in the pipeline.”

US corporations have already taken a major hit. General Motors has said that the tariff increases have reduced its profits by more than $1 billion. Nike faces cost increases of $1 billion and has said it is planning “surgical” prices to try to counter their effect on its bottom line.

GM has said it will absorb the tariff blow, as have other firms. But the auto giant is not some kind of benevolent fund. It is engaged in a desperate dog-eat-dog with other auto firms for profit and market share. The laws of this struggle in the capitalist system compel it to try to recoup the tariff costs it has absorbed by extracting greater profits from its workforce, via job cuts and intensified exploitation.

While the tariff hikes have yet to show up fully in official data—though the lived experience of working-class families tells a different story—they are starting to make their impact.

Data released earlier this month showed that wholesale prices, tracked by the producer-price index (PPI) were 3.3 percent higher in July than the previous year. The reading from the Bureau of Labor Statistics (BLS), the head of which was sacked by Trump at the start of the month after a downbeat jobs report, was well above the 2.4 percent increase in June and the expectation of a 2.5 percent rise.

Commenting on the data to the Financial Times (FT), Bill Adams chief economist at Comerica Bank said: “Tariffs are causing business to raise the prices they charge each other, which will show up in higher consumer prices over time.”

Chris Zaccarelli, chief investment officer at an asset management firm, told the FT that the rise in the wholesale index “shows inflation is coursing through the economy, even if it hasn’t been felt by consumers yet.”

In an editorial on the PPI jump, the Wall Street Journal (WSJ), a mouthpiece for sections of the ruling class opposed to Trump’s tariff policies because they contravene the “free market,” said the figures showed we now know who is paying the tariffs.

Trump administration officials were anxious to convince voters that someone else, somewhere else in the world would pay for them instead of American households. But the inflation data told a different story, WSJ said.

The PPI index got worse the closer you looked, it said. Goods and services both experienced “substantial” inflation with rises of 0.7 percent and 1.1 percent month-on-month respectively. And goods and services related to business investment were becoming pricier. It warned that companies which had absorbed the increased costs, at least for the time being, would not be able to do so forever.

The emergence of the facts concerning the impact of Trump’s tariffs on the American economy and the working class in the form of rising prices, job cuts and worsening conditions will not halt the Big Lie campaign of the Trump regime.

Rather it will be intensified, along with the push to turn once independent organisations, which sought to supply accurate information, into compliant propaganda outlets. That is the meaning of the sacking of the BLS head.

As Peter Tchir, head of macro strategy at an investment bank, commented wryly to the FT after the release of the PPI data: “[I]f I were the person who produced the report, I would probably be dusting off my resume.”

Qantas fined $90 million over illegal sacking of 1,800 workers

Martin Scott

Last week, Federal Court Justice Michael Lee ordered Qantas to pay a fine of $90 million over its illegal sacking in 2020 of 1,820 baggage handling workers. At least $50 million of this will be paid directly to the Transport Workers Union (TWU), which unsurprisingly hailed the decision as a massive victory.

Qantas 747 [Photo by Sheba_Also / CC BY 4.0]

The fine is on top of $120 million the airline was previously ordered to pay in compensation to the workers—around $66,000 each on average, less than the median annual wage nationally—who were unceremoniously thrown on the scrap heap at the height of COVID-19 lockdowns and who have waited five years for the seemingly interminable legal manoeuvres to conclude.

What happens to the remaining $40 million of the fine is unclear. Last week, TWU national secretary Michael Kaine said the union would be “strongly submitting” that it go to “those 1,820 workers whose lives have been absolutely decimated.”

Yesterday, however, the union’s lawyers told the Federal Court “our position is $30 million would be an adequate sum [for the workers], and that the rest would be used for the general purposes.” In other words, the TWU bureaucracy wants to claw back an average of $5,500 each from its “absolutely decimated” members, in order to up its payout to $60 million.

The $90 million fine is reportedly the largest ever handed down against a company for breaching Australian industrial relations legislation. But this says more about the pro-business character of the laws and the courts that enforce them than the size of the fine, which is a drop in the ocean for Qantas. The company recorded an after-tax profit of $1.6 billion for the 2024–25 financial year, 27.9 percent higher than in 2023–24, off $23.8 billion in revenue.

While Justice Lee did not order the maximum possible penalty of $121 million, he stated that the fine should be large enough to not be viewed by Qantas as a “cost of doing business.” The response of the financial markets—a 1.6 percent jump in the airline’s share price in the hours after the ruling—suggests it is being viewed in exactly that light.

In handing down the fine, Lee referred to documents suggesting Qantas has saved some $80 million a year by outsourcing baggage handling, on top of $125 million annually from other aspects of a massive restructuring operation undertaken by the airline.

Noting that “neither the Commonwealth nor any executive government agency” took action against Qantas over the illegal sackings, Lee made clear that his ruling was intended to encourage the unions to serve as de facto regulators.

Lee declared: “It will send a message to Qantas and other well-resourced employers that not only… will they face potentially significant penalties for the breach of the act, but those penalties will be provided to trade unions to resource those unions in their role as enforcers of the act.”

The TWU bureaucracy, notwithstanding its complaint that $50 million is not quite enough, certainly agrees with this role, as do other leading union officials.

A spokesman for the Australian Council of Trade Unions (ACTU) said the “decision makes clear that when companies break the law, working people must have the means to hold them to account.” The “means” he is referring to is not any industrial or political struggle by workers. Instead, it is the capacity of the union apparatus to bankroll protracted legal machinations that serve to enrich the bureaucracy and prevent such a struggle.

The reality is that the $50 million payout to the TWU is a reward for services rendered not as a regulator of industrial laws, but of the working class. The bureaucracy earned its bounty by ensuring that the substantial anger of workers, at Qantas and more broadly, over the illegal sackings did not result in strikes or other industrial action, but was safely diverted behind the court case.

The TWU leadership was not only protecting Qantas, but the federal Liberal-National government, which, with the full support of Labor and the ACTU, handed the airline billions of dollars in so-called “Jobkeeper” payments even as it sacked or stood down vast swathes of its workforce.

Qantas used the onset of the COVID-19 pandemic as a pretext to deepen its existing restructuring operation, slashing at least 8,000 jobs and expanding its use of subsidiary companies as a means to employ new hires under lower wages and conditions than existing workers. In addition, the airline has imposed successive real wage cutting enterprise agreements across virtually its entire workforce.

None of this would have been possible without the collaboration of the TWU and other aviation unions, which have kept industrial action to a non-disruptive minimum throughout the past five years, despite votes to strike by almost every section of workers.

The integration of the unions into the framework of the pro-business courts and their hostility to any industrial action even when masses of workers are sacked are expressions of the role of the bureaucracy as an unalloyed police force of the corporations and governments.

The draconian Fair Work industrial legislation introduced by the union-backed Labor government in 2008, and its various amendments, including by the current federal Labor government, have expanded the power of, and further entrenched the union apparatus in, the industrial courts. The purpose is to deepen the suppression of strikes and the class struggle as a whole.

The balance sheet for the five years since the illegal sackings is revealing. Qantas is up by hundreds of millions of dollars, as the fine and compensation are dwarfed by the savings from the outsourcing and other cost-cutting measures undertaken with the confidence that the TWU and other unions would block any organised opposition by workers.

The TWU has pocketed at least $40 million after legal costs. The law firms representing both sides have collected tens of millions. The losers are the workers: the sacked baggage handlers, whose compensation after five years in the wilderness amounts to less than a year’s wage, and all the other Qantas workers who have been outsourced or slapped with real wage cuts enforced by the TWU and other aviation unions.

The World of Debt: “Stark disparities and systemic inequalities” in the world of public debt

Jean Shaoul

A record 61 countries out of the 193 United Nations member states spent at least 10 percent of government revenues on payments to the world’s financial parasites: the banks and increasingly private creditors, asset managers and hedge funds.

The impact has been devastating: some 3.4 billion people live in countries that spend more on interest than health and education.

The latest The World of Debt 2025: It is time for reform published by the UN Conference on Trade and Development (UNCTAD) reports that global public debt rose to $102 trillion in 2024, the highest level ever. Low-income countries accounted for $31 trillion, one third of the total, a substantial increase from their 16 percent share in 2010.

A World of Debt: It is time for reform, a report published by the UN Conference on Trade and Development (UNCTAD) [Photo: UN Conference on Trade and Development (UNCTAD)]

The report draws attention to the record-high public debt burdens that poor people in the world’s poorest countries face as their governments—mainly in Africa, Asia and Oceania, Latin America and the Caribbean--pay out a record $921 billion in interest, a 10 percent increase on the previous year. Their governments paid out $25 billion more in interest than they received in new sources of income, leading yet again to a net outflow of funds.

The report points out the “stark disparities and systemic inequalities” in the world of public debt. The burden varies widely between countries depending upon the terms of financing and the types of creditors they can access and that “systemic inequalities in international financial systems are making things even more challenging”, with poor countries’ borrowing costs two to four times that of the US.

It mentions but does not dwell on the fact that increasingly low- and middle-income countries are borrowing from private creditors. Neither does it explain who these private creditors are, or the underlying economic, financial and legal processes involved.

As well as commercial banks such as JPMorgan Chase, Citibank, Deutsche Bank, HSBC, private creditors include: bondholders such as hedge funds, pension funds, asset managers, private equity and hedge funds, especially “vulture funds” that buy distressed sovereign debt and sue for repayment, such as Elliott Management in Argentina’s debt crisis; and asset managers such as BlackRock, Vanguard, and Fidelity that hold large amounts of “emerging market” sovereign bonds.

As a result, low- and middle-income countries now owe about 61 percent of their external public debt to private creditors, 30 percent to bilateral lenders, with China being the largest single lender, and about 10 percent to the multilateral institutions such as the International Monetary Fund (IMF) and World Bank.

According to the Financial Times, this shift to private creditors accelerated after the 2008 financial crash, when banks came under increasing scrutiny, and private equity firms and asset managers more generally took centre stage. By the end of 2021, private creditors accounted for 61 percent of developing country debt, up from 46 percent in 2010. In some cases, such as Ghana, commercial lenders, including BlackRock, held about 76 percent of its external debt during its restructuring.

According to research by Debt Justice UK (formerly Jubilee Debt Campaign) using IMF and World Bank data on 88 low- and middle-income countries, private creditors received 39 percent of external debt payments, compared with 34 percent to multilateral institutions, 13 percent to Chinese public and private lenders, and 14 percent to other governments from 2020-2025.

Tim Jones, Debt Justice’s policy director, said its research put paid to the myth that China played the primary role in creating debt crises in low-income countries. This false narrative has been endlessly promoted by the US to deny funding via the multilateral organisations that it dominates to heavily indebted countries, as in the case of Zambia and other countries, on the basis that new loans or debt restructuring would simply end up in China’s pockets.

China has lent hundreds of billions of dollars for infrastructure and other projects in developing countries, often using export earnings from commodities or cash held in restricted escrow accounts from borrower nations as security for the loans.

Jones said, “Commercial high-interest lenders are receiving the greatest debt payments by lower-income countries” and demanded that “Where debt payments are too high, all external creditors need to cancel debt, in proportion to the interest rates they charged”.

The data also underscores the enormous power the private creditors wield in countries that have to slash vital public and social services to pay them as they seek to restructure their debts.

- In Chad, Glencore delayed negotiations while continuing to be paid in full and Chad received no debt relief.

- Ethiopia’s private bondholders have refused take a “haircut” and threatened to use the UK courts to pressure Ethiopia to accept a weak deal.

- Zambia, which has poverty rates among the highest in the world, is in debt distress. It defaulted on its Eurobonds in November 2020 and has also accumulated arrears to other creditors. It has still to reach a deal with some private creditors, including UK-based Standard Chartered, after four and a half years of negotiations.

- Ghana has not been able to reach a deal with any of its non-bond private creditors, with some of them using political pressure to extract payment in full.

- Malawi has been trying to renegotiate its debt with Afreximbank and other high-interest lenders since May 2022, to little effect.

- Bondholders are refusing to restructure Ukraine’s GDP-linked warrants.

- In Sri Lanka, Hamilton Reserve Bank has rejected bondholder restructuring and is continuing to pursue a court case in New York state.

Perhaps the most egregious example is South Sudan, where Israel is reportedly seeking to ethnically cleanse Gaza’s Palestinian citizens. The impoverished oil-rich country, which became “independent” in 2011, faces a dire hunger crisis and disease outbreaks including cholera, exacerbated by ongoing climate change-induced droughts and flooding, years of conflict and waves of returnees and refugees fleeing the civil war in Sudan. Afreximbank successfully sued South Sudan for $657 million in the UK courts after it defaulted on high-interest loans, equivalent to 47 percent of South Sudan’s government revenue.

Internally displaced people walk along a street in Juba, South Sudan, Thursday, Feb. 13, 2025. [AP Photo/Brian Inganga]

These private creditors are typically far wealthier than the countries they lend to, with BlackRock alone managing $10 trillion in assets under management, Vanguard $8 trillion and State Street $4 trillion, compared to Ghana’s GDP of $75 billion, Zambia’s $30 billion, and even Nigeria’s, Africa’s biggest economy, $475 billion.

One asset manager has more money under management than the total annual economic output of the countries it lends to. State Street for example has more than 10 times South Africa’s GDP.

Just a handful of large asset managers, hedge funds and banks control vast amounts of money from pension funds, insurance companies and wealthy clients, so when they buy a sovereign bond--a government borrowing instrument--they typically wield far more power than the borrowing state.

Even when debt levels seem moderate, the lender can wield disproportionate influence over economic policy, fiscal priorities, and restructuring terms. Just a few global financial giants, such as BlackRock, Vanguard, State Street, etc., hold such a massive amount of sovereign bonds that their financial strategies--speculation--on the international markets can sway debt markets and national financing conditions.

The people that control these financial vultures pay themselves enormous sums of money. In 2024, BlackRock’s CEO Laurence D. Fink received $30.77 million “compensation”, its president $21.78 million, and two others more than $10 million, while State Street’s CEO received $17 million. Vanguard, as a private corporation, does not disclose its executive compensation, but 10 years ago was reportedly paying its CEO around $15 million.

Utterly indifferent to the social devastation and economic impoverishment they are creating, these financial parasites have both the financial clout and the legal means, via their debt contracts, arbitration courts and investment treaties that are heavily stacked in their favour, to demand full repayment in the case of a default. For the debtor countries, or more precisely for their workers and rural poor, a default means more belt tightening, no work and more cuts in the already meagre healthcare and education and destabilises the whole economy. For the creditor, it is little more than loose change.

Power counts. It is more profitable for these private creditors to lend to low- and middle-income countries than to high-income countries. This power is in the hands of just a few thousand people who have effective control over entire countries.

This narrow financial oligarchy can subordinate much of the global economy to their endless quest for profit and enrichment. And what they do determines the fate of billions of people around the world. Yet their activities and finances are invisible to, much less controlled by, the working class who generate the wealth they expropriate.

Ukrainian government proposes prison sentences for illegal border crossings

Jason Melanovski

Ukrainian President Volodymyr Zelensky talks during the press conference in Kiev, Ukraine, Sunday, Aug. 24, 2025. [AP Photo/Efrem Lukatsky]

Ukraine’s Cabinet of Ministers introduced a bill to Ukraine’s parliament that would sharply increase the criminal liability of individuals caught illegally crossing the border, as thousands of Ukrainian men a month attempt to flee forced conscription.

The bill’s introduction is a tacit admission that the war effort is far from popular among those who are forced—often through physical coercion—to fight and die in it. 

As Ukraine’s Ministry of Internal Affairs said in a statement, “Today, unfortunately, we are seeing mass attempts to evade mobilization due to illegal travel abroad. As practice shows, administrative fines do not deter violators. Our responsibility is to ensure the security of the state and support its defense capability in the most difficult times.”

Under the proposed measures, individuals who are subject to military service and caught illegally leaving the country could be sentenced to a term of three to five years in prison and fines. Under current law, illegal border crossers are subject only to administrative penalties and fines, a price many are willing to pay given that their alternative is dying at the front.

The authors of the proposed new measures admit in the bill’s explanatory notes that illegal border crossings have surged since the beginning of the NATO-backed proxy war against Russia.

According to government data, from 2022 to 2025 Ukraine’s border guards detained 43,000 mobilizable men aged 18—60 attempting to cross the border outside of official checkpoints. This is undoubtedly an undercount of the true number of Ukrainian men fleeing the war. Tens of thousands more successfully fled the country illegally and simply were not caught.

As demonstrated by numbers from neighboring Romania, border guards there detained over 5,000 Ukrainians in just the first seven months of 2025 and over 26,000 since the beginning of the war in 2022. 

In addition to increasing criminal liability for the individuals themselves caught crossing the border, the proposed bill also cracks down on organizers of illegal crossings. This measure is clearly meant to target Ukraine’s border guards and other government officials that are involved in widespread bribery schemes to get draft dodgers or “refuseniks” out of the country.

Earlier this year in May, Ukrainian authorities announced they had arrested a “gang,” which included two border guards, for charging Ukrainian men fleeing the country bribes of up to $15,000 and then classifying them as “disabled” to allow for their exit.

In a country where the average monthly salary is approximately $500 per month, such schemes mean that the war has a vastly disproportionate effect on the country’s working class and poor, particularly in rural areas. Reportedly, many rural villages throughout Ukraine have been totally cleared of military age men. Here, forced mobilization by press gangs is easier to carry out and less likely to be recorded and end up on social media. Videos of such forced street kidnappings are now regular part of Ukrainian social media.

The bill has already been criticized within Ukraine due to its obvious hypocrisy and double-standards. As Ukrainian parliamentary Oleksiy Homcharenko pointed out to news outlet Strana, the brother of newly appointed Prime Minister Yulia Svyrydenko fled to London to “study” and did not return to the country despite being subject to mobilization. There are countless other privileged Ukrainians who have fled illegally without any repercussions at all from the state and who have been able to make successful careers abroad during the war. Political scientist Yuriy Romanenko told Strana that the bill on criminal liability for escaping from Ukraine indicates the formation in Ukraine of a “dictatorial regime”. In his opinion, with such decisions, the Zelensky government “is creating a revolutionary situation in wartime with its own hands.”

The proposed crackdown on draft dodgers is an indictment of the authoritarian Zelensky regime and the entire proxy war waged by Western imperialism under the fraudulent banner of defending “democracy” in Ukraine and over the bodies of hundreds of thousands of Ukrainians. 

Despite previous internal polling showing largely positive support for the war, the hundreds of thousands of military age men fleeing the country either legally or illegally testifies to a very different sentiment among the country’s working class. While mass protests have yet to erupt over the war, it is clear that huge numbers of Ukrainians want no part of it. A Gallup poll in early July found that 69 percent of Ukrainians favor a negotiated end to the war as soon as possible. Only 24 percent support continuing to fight until victory, by far the lowest figure since the beginning of the war.

The bill’s introduction takes place just as Russia has steadily advanced in the Donbass region, exposing Ukraine’s “porous” front lines which are short of soldiers as Ukrainian men continue to flee the country to avoid mobilization. These advances, which have come at a tremendous cost to both Ukrainian and Russian lives, are part of the efforts of the Russian oligarchy to bolster its negotiating position in the ongoing talks with Donald Trump about a settlement of the conflict.

According to the United Kingdom’s Defense Ministry, Russia has been advancing faster each month since March of this year and likely captured between 500 and 550 square kilometers in July alone.

In addition to advancing into the Dnipropetrovsk province in June for the first time since the war began, Russian forces have continued their encirclement of the logistics hub of Pokrovsk. The city was previously home to over 60,000 people but only 1,000 now remain as a result of the war. 

While the Ukrainian government closely guards the true number of casualties in the war, experts such as Ukrainian-Canadian political science professor Ivan Katchanovski estimates that between 160,000—200,000 Ukrainian soldiers have been killed with about 640,000—800,000 injured. Whatever the exact number, it is clear that the number of dead soldiers in a country with a pre-war population of under 40 million represents a demographic proportion of death not seen in Europe since World War II.