The overproduction crisis in the United States is beginning to hit all corners of industry which continue to see production levels mostly in stagnation, decline or saturated with overstocked inventories as demand dwindles. According to the October 2nd article By the S&P, US Manufacturing PMI: Five Key Takeaways as Production Growth Slows Amid Tariff Disruptions, in May the largest unsold inventory of raw materials in decades stacked up in warehouses across the country as companies prepared for the tariffs, and now in October the largest inventory of unsold finished goods in nearly 20 years has grown as companies utilized these extra materials for production but are now finding no demand for them due declining consumer buying power. The result is likely to be cut prices, and hastened slow down in production across the board. Despite the Trump administration demands for increased oil production, declining prices are leading to reduced drilling of new oil wells and diminished production numbers. In the farm sector, a recent article in The American Prospect points out how U.S. corn and soybean production is being encouraged by subsidies and mandates even while export markets (especially China) are pulling back resulting in gluts of supply and depressed prices. The tech industry has committed huge resources to AI: cloud infrastructure, data centers, compute hardware, AI-software layers, yet market research firms say there are already “too many” AI solutions/tools on offer relative to real demand. The Bank of England has flagged risk of a sharp correction among AI-focused tech stocks, amid warnings of a possible “bubble” with high valuations, massive investment, but increasingly unclear returns.

As we have previously reported in TICP 64 in the article World Imperialism’s Struggle For Control of the Seas, The Chinese shipbuilding industry which currently dominates the global shipbuilding industry, is experiencing an overproduction crisis which has diverted many ships into Russia’s “Shadow Fleet”. Meanwhile the U.S. is desperately working to rebuild its own shipbuilding industry so as to enable it to wage global war, and to do that it must retain its steel industry which is a backbone to any shipbuilding industry; however, despite its attempts to re-energize U.S. steel manufacturing through tariffs and expanded production, production is already facing its own overproduction crisis due to stagnant demand. In turn, high steel and labor costs continue to plague the development of a domestic shipbuilding industry creating a chicken and egg scenario. As China dominates in the shipbuilding market, so too does it in the global steel market, with its output now accounting for over half of world crude steel production. As domestic demand in China has begun to weaken (especially in sectors like real estate and infrastructure), a surplus of production capacity is pushing Chinese firms to export more steel at lower prices. In response, the U.S. has imposed steep tariffs on steel and aluminium imports claiming national-security justifications.

According to an August 26th article by the Wall St. Journal titled, The Boom in New Steel Mills is Outpacing Demand. Today the United States has the highest prices for steel the world over as the U.S. steel industry has enthusiastically embraced the tariffs. As foreign markets are glutted with steel leading to price depressions, the U.S. steel prices are twice the price of foreign steel reaching upwards of $800 a ton. The tariffs have allowed U.S. steel mills to corner the domestic market cutting out foreign competition that manufacturers were historically dependent upon. In expectation of a large-scale reshoring of manufacturing to take place alongside the tariffs a massive expansion of steel industry production capacity has also gotten underway over the last year; however, the expected boom in manufacturing has not occurred, leading to a developing market glut of steel. The recent acquisition of U.S. Steel by Nippon Steel led to the company pledging $14 billion to build a new steel mill and modernizing old plants, Nucor, the largest steelmaker in the U.S., Steel Dynamics and ArcelorMittal have expanded U.S. production and South Korean steelmakers Hyundai Steel and Posco want to build a Louisiana plant to supply steel for Hyundai’s made-in-the-U.S.A. cars. Twenty-one million tons of additional steel production capacity have been announced, placed under construction or completed in the past four years, according to a Wall Street Journal analysis of market data from Argus Media. That figure is roughly a quarter of total U.S. production of the metal that will sit with no expected increase in demand which has shrunk from 2015 levels when demand flatlined a decade ago.

The developing glut in the steel market is a sign that the U.S. bourgeois may soon become even more thirsty for an expanded military conflict. Steel gluts themselves don’t mechanically “cause” world wars but historically, they have marked moments when capitalist economies reached their limits of peaceful expansion. In those moments, ruling powers often turned to military production and imperial confrontation to resolve crises of overproduction as excess steel can easily be absorbed in the countless weapons of war demanded by imperialist states at war.

The Tariff War, The Economic Decoupling Before World War

As the overproduction crisis worsens and economies contract across the globe, tensions between the imperialist powers are exacerbated as tariff walls are implemented around key military and strategic industrial sectors and the national industries are pushed into struggles for conquest of raw materials and destruction of the opponents productive powers. The profitability of the military defense sectors then become key drivers in propping up the entire decaying capitalist economy, thus further incentivizing militaristic conflict. This basic feature of imperialism is on full display in recent months as deeply protectionist measures have been raised around key strategic rare earth minerals shipbuilding and steel industries.

Over the past month, the United States and China have rolled out reciprocal measures targeting their rival’s shipping sectors, turning port access and vessel ownership into the latest arenas of trade conflict. Starting October 14, 2025, the U.S. implemented “special port fees” on vessels judged to be Chinese-controlled, built in China, or operated by Chinese entities. China responded the same day with its own levy. Vessels owned, built, flagged or operated by U.S. entities must now pay per net ton for their first Chinese port call, with fees set to continue to rise. Together, these moves have already disrupted routing decisions, pushed shipping rates higher, and signaled that shipping and ship-yards are now treated as strategic national-security zones, in the conflict between the two super-powers.

Parallel to the fee battle, the U.S. is doubling down on industrial investment in domestic shipbuilding to lessen reliance on China’s dominance in commercial shipyards and supply chains. For example, Hanwha Ocean’s $5 billion upgrade of Philly Shipyard is aimed at turning an annual build-rate on one ship a year into as many as twenty new vessels. Meanwhile, Huntington Ingalls Industries’s partnership with HD Hyundai Heavy Industries on naval design, advanced manufacturing and workforce training reflects a broader industrial pivot to building up war manufacturing capabilities. In October 2025, China imposed sanctions on five U.S.-linked subsidiaries of South Korea’s Hanwha Ocean, accusing them of aiding U.S. investigations into China’s shipbuilding sector, in order to pressure Seoul and disrupt U.S.- South Korean defense industrial cooperation. Further, top U.S. financial institution JPMorgan Chase announced a 1.5 trillion dollar investment into U.S. defense industries including a multi-billion-dollar long-term investment for critical maritime infrastructure and shipbuilding capacity. These moves are explicitly framed as part of the “revival of American shipbuilding” but in reality are part of a wider arms race and military build up between the imperialist powers as the United States must rapidly expand its minuscule naval capacity if it ever hopes to win a war with China.

Also in October, China announced new restrictions on the export of rare earth minerals, a critical market for technological finished goods that the Chinese have a near monopoly on. According to an October 21st article by Reuters titled Goldman Sachs Flags Risk of Disruption in Supply of Rare Earths, Key Minerals, analysts estimate that a mere 10% disruption in global rare-earth supply could cost up to US$150 billion in lost industrial output. With China producing about 69% of global rare earth mining, 92% of refining and 98% of magnet manufacturing, its export curbs on rare earths are seen as a serious threat to sectors from EVs to defense. This move will likely force the United States to more aggressively seek territorial acquisitions for these minerals elsewhere.

Already, the U.S. has begun reacting with an $8.5 billion critical-minerals deal in October with Australia to boost alternative supply chains, alongside Australia’s announcement of a doubling of it’s naval fleet capacity to counter China. Meanwhile, U.S. agencies are exploring investment in the Tanbreez deposit in Greenland, amid the U.S. continued menacing of a military territorial conquest of the arctic island.

During their meeting in Busan on October 30, 2025, Trump and Xi reached a one-year trade truce in which China agreed to suspend planned export controls on key rare-earth minerals that it had threatened as leverage. In exchange, the U.S. offered to reduce its “fentanyl-tariff” on Chinese goods from 20% to 10%, lowering overall tariffs on Chinese imports. The deal also includes China committing to buy large quantities of U.S. farm products (soybeans, sorghum) and remove certain measures against U.S. chip-companies, while the U.S. agreed to pause its threatened 100% tariff on Chinese exports. The end result is that U.S. access to Chinese-controlled rare earths has been temporarily safeguarded and a major tariff escalation has been averted, but the agreement is time-limited (one year) and China retains broader structural leverage as the U.S. was forced to make significant concessions in the form of tariff reduction to secure access to strategic minerals rather than China giving up its dominance.

The rush for strategic resource acquisition is occurring among a world consumed by tariffs and a vast military buildup. Across Europe, Asia and the United States, a clear trend of remilitarisation is now well-underway. In Europe, military expenditure jumped by 17 % in 2024 to about US $693 billion. Within the North Atlantic Treaty Organization area, 18 of 32 members in 2024 spent at least 2 % of GDP on defense, the highest number since 2014. In Asia, the region’s largest military spender, China, raised its budget to about US $314 billion in 2024 (+7 % year-on-year), while other Asia-Pacific nations saw rapid growth in procurement and R&D. As traditional industrial growth slows and civilian investment becomes more constrained, defense has emerged as one of the few expanding sectors worldwide with global military-expenditure hitting over US $2.7 trillion in 2024. The combination of rising tariffs, stagnant or declining broader economic growth, and high geopolitical uncertainty means governments are diverting scarce capital into defense procurement, research & development, and infrastructure. In effect, the defense-industry complex is one of the only sectors experiencing sustained growth globally as fiscal priorities shift under pressure.

The Financial and Monetary Crash

Just as the global overproduction crisis is pushing the bourgeois states across the world into increased investment into military production, it’s financial and monetary policy reflect a system which is becoming more unstable by the day.

Currently, the dollar is in the steepest decline it has been since the Nixon administration in the 1970s, with a depreciation of 10% since January of this year. On October 10, 2025, after Donald Trump announced that the United States would impose 100% tariffs on Chinese exports and enforce strict export controls on “any and all critical software” from China, a move meant to counter Beijing’s restrictions on rare earth mineral exports. In response to the announcement, Bitcoin’s price crashed sharply, falling over 20% in a single week after mass liquidations wiped nearly $19 billion from the crypto market. Additionally, in recent weeks, the collapse of non-bank firms such as First Brands Group and Tricolor Holdings has rattled the U.S. financial sector. First Brands filed for bankruptcy with more than $11.6 billion in liabilities and a reported $2.3 billion discrepancy in its invoice-factoring scheme, according to Reuters. At the same time, banks such as Fifth Third Bancorp recorded losses tied to Tricolor’s collapse, including a $178 million hit, highlighting exposure to sub-prime auto-finance and opaque credit markets. These failures are raising alarms about hidden risks in shadow-banking, private-credit and non-depository firms, and have contributed to a sharp drop in U.S. regional bank stocks, with some institutions revealing large loan charge-offs and fraud exposures.

Meanwhile, the repurchase (repo) market is flashing red. U.S. banks borrowed $18.5 billion from the Federal Reserve’s Standing Repo Facility in October, the largest draw-down since the pandemic era, while the benchmark Secured Overnight Financing Rate (SOFR) climbed to 4.42%, signaling pressure in short-term funding markets. These strains echo the pre-2020 sharp spike in repo rates (in mid-September 2019 rates soared from ~2% to above 8%) that preceded the COVID-era market trauma. The confluence of bank credit stresses, shadow-finance failures and repo market tightness suggests that the financial plumbing is under renewed strain, even if no systemic failure has yet occurred it is certainly on the horizon.

The Federal Reserve will soon likely be forced to pause or reverse its quantitative-tightening (QT) program amid its current policy of decreasing interest rates, marking a shift toward easing, due to mounting liquidity pressures and funding strains in the banking system. For example, bank reserves have dropped to approximately $3 trillion, representing under 10% of GDP a level the Fed has previously flagged as risky; however, as we have previously reported in TICP 62 Oligarchy in the U.S.? Only Workers’ Revolution Can Stop Capital’s Onslaught, the escalating U.S. debt increasingly ties the hands of how much more debt the government can take on without an outright default on it’s loans as the debt to GDP ratio continues to grow at an increasing rate amid diminished GDP expectations and growing demand for debt.

A major market crash as we have seen in the past has winners and losers, used by the big bourgeois to further consolidate itself by purchasing out the companies that go bankrupt while it further incentives war as the only long lasting remedy.

As we mention in our 1952 article The New Deal: State Intervention in Defense of Capital, a few years after the 1929 stock market crash, attempts were made to revive the international economic system under the London Economic Conference created by Hoover by way of reducing global tariffs and reviving prices to head off the massive deflation, along with peacefully setting international debts (most of which were owed to the U.S.) after it was recognized that the systems of tariffs established after the stock market crash only deepened the crisis; however, the United States abandoned these attempts under the Democratic President Roosevelt in order to revive its own economy first over and above those of the rest of the world. In order to do so the United States began implementing further tariffs similar to those implemented by Hoover’s ultra protectionist Smoot-Hawley Act of 1930, which had led to reciprocal tariffs and a global decline of world trade by 60% at the start of the Great Depression.

Likewise, in 1933, Roosevelt ended the U.S. gold standard, ordering Americans to exchange their gold for paper currency and prohibiting private gold ownership to stop hoarding during the Great Depression. This move allowed the government to expand the money supply, devalue the dollar, and stimulate economic recovery without being constrained by gold reserves. The U.S. wanted to devalue the dollar in the early 1930s to combat the deflation and economic collapse of the Great Depression. By lowering the dollar’s value relative to gold, Roosevelt aimed to raise prices and make American exports more competitive, and reduce the real burden of debt all of which was impossible to do under the rigid gold standard that kept money supply and prices artificially low.

As we mentioned in the article Wall St.’s Trade War is Nothing New in TICP 63 under the Trump administration’s unofficial trade and monetary strategy known as the Mar-a-Lago Accord, they intend to execute a monetary and trade strategy with precisely the same outcomes as that utilized first by Roosevelt under the New Deal, later under Nixon when he ended the convertibility of dollars to gold for foreign banks and then later, under Reagan and the Plaza accord, by other means: devalue the dollar while retaining it’s status as world reserve currency in order to increase export competitiveness for U.S. industry & reduce debt burden, change monetary policy on gold so as to enable continued and expanded deficit government spending, utilize tariffs to protect key military production industries while weaponizing them and tying military protection to continued use of U.S. dollar as reserve currency. The end result is higher costs of goods for consumers, declining real wages for workers across the world in the name of economic nationalism and defense of mother countries’ industrial might as workers are marched to war at bayonet point whenever it is in the profit interest of Capital.