Understood socialist embracing America (4)
I believe the answer is:
read
'understood' is the definition.
(I've seen this in another clue)
'socialist embracing america' is the wordplay.
'socialist' becomes 'red' (socialism is often associated with the colour red).
'embracing' is an insertion indicator.
'america' becomes 'a' (common abbreviation - e.g. in organisation names).
'red' enclosing 'a' is 'READ'.
(Other definitions for read that I've seen before include "Comprehend written words" , "Lecture" , "Stomach" , "register" , "examined" .)