Macroscope | By waging war on Iran, Trump leaves the US economy more vulnerable
As Washington fights a war with global economic ramifications, allies may soon begin to reassess their financial support of US coffers
The US is a debtor nation on a grand scale, running as it does both current account and budget deficits and therefore being highly dependent upon foreign capital inflows. Will the Trump administration’s antics – widely perceived as illegal rather than simply misguided – still allow the US to attract flows from international investors as the war continues?
The reaction of financial markets to the war has been relatively muted so far, particularly in terms of equity prices. Movements in stock indices are what attract most attention among investors. However, what matters more is the impact on banks and other institutional lenders when it comes to investment in US bonds.
If these financial flows are curtailed, what will be the impact on the American war machine, which supports US and Israeli attacks on Iran? These are questions that have gone largely unanswered.
Some have focused on the fact that energy self-sufficient and even energy-exporting nations, such as the US, should be able to insulate themselves from energy import shocks or even find an economic advantage. The Financial Times, for example, noted in a report on March 9 that the shale revolution had transformed the US into an energy superpower over the past two decades.
Some believe these strengths will endure. Genron NPO, a Tokyo-based non-profit research organisation, expects the US to “continue to use its military and economic strength to dominate the world through ‘stability through power’ for a long time”.