Tariffs, not Iran, will define Trump’s presidency
Those involved in business need to keep their eye on the right ball. Iran might continue to dominate the headlines, but it’s tariffs that will affect the bottom line, says Tim Hames
Political events can have an enormous sense of drama, while distracting from what really matters. This is likely to prove the case for Donald Trump over this summer. A month ago, few commentators argued that Iran and its nuclear ambitions would become the story of international politics and involve a direct American military intervention against Tehran. Now that this has happened, there is the temptation to assume that the “what happens next?” question in the Middle East will become all-consuming, the issue that keeps the lights on late at the White House, on Air Force One, and at Mr Trump’s favoured Florida retreat.
What might instead be witnessed in terms of the United States, Iran, Israel and others (despite their public positioning, few in the region will be more delighted and relieved about what has occurred than the authorities in Saudi Arabia), might be referred to as the calm after the storm.
Politics in Iran is likely to turn inwards and be intensely introspective
Politics in Iran is likely to turn inwards and be intensely introspective. The fundamental matter in that country is whether there will be, over months more plausibly than weeks, a changed regime or regime change. The changed regime could occur in one of two forms. Either the President and the reformist faction (long constrained by the theocratic camp) succeed in turning the Supreme Leader into little more than a constitutional or a titular head of state, or the reverse will be true with any pretence of Iran being, in effect, an outright religious dictatorship being abandoned.
Similarly, regime change could either be a managed affair with the mainstream army serving as the interim means of moving Iran back into a secular society not dissimilar to where it was in 1979 (but emphatically not with a Shah, whatever the one in exile might wish) or it could be a highly disorderly affair, with one government and system ousted but no clear alternative then installed. It is precisely this “chaos” that Mr Trump has been careful not to be seen inciting.
The key point, though, is that the US President is destined to be a by-stander in this process.
Two looming deadlines
Where he will be at the absolute centre and throughout the summer months is tariffs and trade. There are two key deadlines coming up shortly. They could be extended but only if Mr Trump can point to credible progress towards extracting the concessions from others to which he is utterly committed. On or about July 8th/9th, the 90-day moratorium on his original Liberation Day (April 2nd) announcement on tariffs will expire. In mid-August, a separate deadline for the US and China to reach at least the outlines of a trade agreement will also reach a moment of truth.
The US-China element of this is by far the most important component of all this activity. The two are together worth more than 40 per cent of the world’s economy. China is (or was), the third largest trading partner for the US after Canada and Mexico. The impact on supply chains of the current impasse has already been enormous. US companies within China are scrambling for a Plan B. China itself is bracing for higher US tariffs by looking to direct its exports elsewhere (there was an increase of just over 16 per cent in Chinese exports to the UK in May, this will not be a coincidence). If the US and China were truly to decouple economically, the impact would be utterly seismic.
Those involved in business and on boards need to keep their eye on the right ball. Iran might continue to dominate the headlines. It will not have much to do with the bottom line. Tariffs and the US-China economic relationship are the issue this summer. Like the weather, it may be hot.
Tim Hames is the author of Trump II: Why He Won. What It Means For The World, a co-founder of Acuti Associates and a Senior Adviser to .