Aftermath: The Trump Who Cried Iran Deal

This story was first featured in the Aftermath newsletter, a series from David Dayen exploring the economic consequences of the war in Iran. To have these stories delivered to your in-box as soon as they are published, sign up for the newsletter here.

Hello and welcome to Aftermath, our pop-up newsletter about the war in Iran. The fact that there still is a war in Iran is our topic today. Read all of our past pieces in this series at prospect.org/aftermath.

Are We Still at War?

Hahahaha.

At some point, everyone involved with the Iran war debacle, from political figures to Wall Street investors to the news media, will resolve to stop lunging at every Trumpian pronouncement of a “deal” to end the war. Even the best possible reading of the latest announcement cannot credibly be described as a deal at all, but rather, agreements to begin talks to reach a deal. The only specific outcome that would result is the opening of the Strait of Hormuz, which was open before the war began. It would not deal with the status of highly enriched uranium. It would not deal with Iran’s nuclear program. It would not deal with that nation’s missile production or capacity. It’s nothing, even in the best-case scenario, but a reset to the negotiations that were under way before the war began.

But we’re not in the best-case scenario, because that assumes that the non-deal deal is actually happening. Which it is not. Since this past weekend’s announcement by President Trump, we have seen Iran dispute really all of the terms of the deal and the U.S. admit that an actual agreement could take some time—which is what you say when nothing is agreed to. We have seen actual airstrikes on missile launch sites in southern Iran, which were described as “defensive” and which Iran has justifiably characterized as “flagrant” violations of the cease-fire agreement, while vowing to retaliate. (We haven’t seen that transpire yet, though there has been exchange of fire.)

When you are in a negotiation, and your negotiating partner violates the terms of the negotiations, you begin to get highly suspicious that any agreement you make will actually be adhered to. That is the position Iran finds itself in, and why we’re going to be in this endless loop of announcing an agreement to begin talks toward an agreement to end the war approximately indefinitely. Welcome to Groundhog Day.

Meanwhile, while everyone talks, correctly, about Iranian hard-liners at odds with their nation’s negotiating posture, Trump has had to attend to his own hard-liners who don’t want peace, here and in Israel, by making a rushed demand for every Arab country to formally recognize Israel, terming that a “complement” to a final deal. And Israel has been working assiduously to sabotage any agreement by bombing and even ordering evacuations in Lebanon, even as Iran is demanding an end to that conflict as one of the terms of the deal.

The core belief of the Trump administration in this and all things is that they can bully their opponent into submission. They act unilaterally and with force and believe with their usual hubris that they can impose their will on anybody. But the Iranians endured an eight-year war with Iraq (aided by the U.S.), taking over one million casualties and countless chemical weapon attacks, while the Ayatollah considered a cease-fire a fate worse than death. Buckling to the initial discomfort today is highly unlikely.

Iran has expanded control of the Strait of Hormuz during this extended cease-fire, instituting checkpoints and imposing fees. They have even increased the geography by moving the boundaries of the strait itself, extending their zone of control by hundreds of miles. All this amounts to a fundamental difference in the facts on the ground (and on the water) from what they were on February 28, when the war began. It will take a long time to get anything approaching a normal level of shipping activity restored, even if Iran relinquishes its control entirely. In reality, the Iranians are more dug in with regard to the strait than they may be with the nuclear program. They now know that they have a stronger economic deterrent to attack from other countries than they had with their nuclear program, and they’re going to fight like hell to keep it.

It is true that the Iranian economy is under some strain, and the country’s leadership would prefer access to global oil markets and the unfreezing of funds. But the country has been able to rebuild its military stockpiles far faster than anticipated. And a recent development by Iran to restore internet access, ending an 88-day blackout, shows that connectivity, rather than U.S. bombs or military blockades, may have been a major factor in the economic slowdown, one that is being reversed.

When you only have one trick, and that’s trying to force submission, and your opponent doesn’t submit, I don’t know what the recourse is. All I know is that the rest of the world is paying a price for this failure to admit defeat.

Think about where we are right now. Prices are outpacing wages for the first time since the post-pandemic inflation. Wholesale prices jumped 6 percent last month. Consumer sentiment is in the doghouse. Two-thirds of Americans are cutting back on their family budgets. This is what’s happening even as the Trump shell game of promising a deal has kept stock prices fat and the wealth effect strong.

In other words, Trump’s bullshit, and the gullible people who happen to be holders of trillions in capital, are the only things holding up the global economy. But a bullshit-based economy cannot survive contact with reality.

That is why economic analysts are finally resigning themselves to the reality that the strait will be closed in some form for months. The near-term result of that is oil prices will reach a new high, which would be at least $30 a barrel above the current figures. But this won’t only be reflected in prices. I know that these warnings of shortages have been out there for so long that they sound implausible, but we’ve really run through the inventory buildup and reserves on an enormous number of goods and commodities, from natural gas to diesel and jet fuel to plastics and fertilizer to roses and tea from Kenya. We are going to see fewer things available for purchase, which will not only drive prices higher but deprive people of material needs.

The past week has also seen a huge sell-off in government bonds, with the proximate cause being the war. The cost of money is going up, which is going to affect any durable goods Americans buy. And if you agglomerate this all together, it sums to hundreds of billions of dollars in lost output, in exchange for no perceivable gains geopolitically.

Maybe oil executives are happy at this turn of events and their fortunes. Nobody else is. And even if Trump doesn’t care about the midterms, the midterms care about him.

Thanks for reading. If you have tips or ideas for future stories, let us know! You can email us at aftermath@prospect.org.