How do you assess the situation in the USA after three weeks of the Iran war?
Not expected to be good. I don’t think we’ve seen the full impact yet. Much depends on how this war progresses – for example, on how quickly the Strait of Hormuz is reopened and how long negotiations last, if any.
What do you see as the biggest risk?
The longer the war and the Hormuz blockade last, the more the price of oil will rise. And consumers will feel this directly. On the other hand, people who are dependent on the oil industry or have invested in it will do well. Because America is a net exporter of petroleum. So there are groups that benefit massively. For most Americans, however, the effect is likely to be negative because they are net consumers of oil. And the longer the war lasts, the more devastating these consequences become. The whole thing is therefore also a distribution problem.
Where else will the USA be hit economically by the war?
The US upswing under Trump so far has not been broad-based growth anyway. A few sectors have experienced extremely strong growth – particularly the AI-related construction sector, i.e. data centers. Essentially, these investments almost single-handedly set America’s gross domestic product on a relatively strong growth path. This was not inclusive growth. It may now be the case that this AI boom will be slowed down. Data centers could become more expensive because construction costs increase. This endangers investments. If this area falters, we will see it immediately. And the rising energy costs will sooner or later be reflected in the general price index. That doesn’t bode well.
I see the danger of a development that could be called “death by a thousand cuts”. If the Strait of Hormuz remains blocked for months, there could even be a technical recession. But even without such shocks, America could remain below its potential in the long term: slow growth, perhaps stagnation. The reason is not just the war.
More and more resources are flowing into corruption and political favors. Companies are no longer investing in innovation, but are instead thinking about how they can make the Caesar’s Court in Washington – i.e. the White House – friendly. Exactly such developments have often been seen historically when large nations slowly stagnate economically.
They say Trump couldn’t care less about a lot of things. At the same time, however, it can be observed that he reacts to the markets – for example in the customs conflict with the EU or in the Greenland debate and again and again in the Iran war. How do you explain that?
