Donald Trump’s Greatest Crisis

Author: Greg Valliere

September 17, 2019

DONALD TRUMP’S GREATEST CRISIS: The deepening threat from Iran — which appears to be itching for a conflict — is an enormous challenge for Donald Trump, both politically and economically, and he knows it. This is Trump’s greatest presidential crisis, with two likely scenarios, both of them bad.

TRUMP HAS ALREADY IGNITED A FIRESTORM IN WASHINGTON by stating that he will wait to see what the Saudis want him to do. His fawning to the Saudis apparently has no limits, which infuriates members of Congress (in both parties), many of whom howled yesterday that the Saudis should take care of the problem and not dictate U.S. military action. And besides, many said, billions of dollars in weapons sold by the U.S. to Saudi Arabia should be sufficient to thwart the Iranians.

TRUMP’S TWO VERY BAD OPTIONS: First, he could take the advice of hawks like Sen. Lindsey Graham and launch air strikes on Iranian oil fields and military installations; these targets were already identified by the Pentagon in June, when Trump called off strikes at the last minute. The problem: air strikes almost certainly would escalate hostilities, and Trump doesn’t want to get bogged down in a Mideast conflict ahead of the 2020 campaign.

THE SECOND BAD OPTION is to do nothing or very little. Trump quickly backed away from his boast on Sunday that the U.S. is “locked and loaded.” He said yesterday that there’s no rush, he doesn’t want a conflict, etc. This is why John Bolton left — he knows that Trump’s instinct is to blink. That sends a terrible signal to U.S. allies and adversaries, who wonder about America’s resolve. Even Barack Obama lobbed an occasional air strike at terrorists.

TRUMP APPARENTLY FEELS THAT he can convince any despot, from North Korea to Iran, to soften and cut a deal once he gets them in a one-on-one setting. And he feels inoculated by a defense budget that is approaching $750 billion annually. But huge defense outlays can’t always thwart small countries and rebel groups, which can inflict enormous damage with drones and cyber-warfare, neither of which costs as much as an aircraft carrier.

THE KEY FACTOR: Iran, crippled by sanctions, is itching for a confrontation with Saudi Arabia and the U.S. Fanatic Revolutionary Guard militants — and their proxies throughout the Mideast — want a fight, which Iran’s leaders believe will result in Western economic disruption and an eventual truce that could jump-start negotiations to ease the sanctions on Tehran.

THE IRANIANS THINK, CORRECTLY, that Trump is eager to bargain; he would have accepted a meeting with them at the United Nations next week — without conditions, he said — but the Iranians aren’t ready for that yet.

MANY WARS — WORLD WAR I IN PARTICULAR — began after miscalculations set in motion events that spun out of control. Trump, typically erratic, has tipped his hand — he now says he doesn’t want to fight. But the Iranians do, and they have absolutely no desire to negotiate now. More drone and missile strikes are probable, and there’s a growing risk that this crisis will get worse before it gets better.

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

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