US President Donald Trump has upended the foundations of the global economic order with his declaration of a tariff war targeting both allies and adversaries to force negotiations towards trade deals that would put an end to their supposed “exploitation” of America. It is essential to assess the geopolitical ramifications of these measures beyond trade dynamics.
Mr Trump is reshaping the global order. Some believe he is dismantling the post-Second World War global system that once served as a stabilising force, and that he is doing so haphazardly and childishly. Others say to wait and think carefully, because Mr Trump is not merely modifying the existing system. He is pushing all stakeholders to the negotiating table quickly, with the aim of realising an extraordinary vision for a new world order.
The whole world has felt the seismic shock of these tariffs, from China and India to Central Asia and Europe, from America’s neighbours to remote islands inhabited only by penguins. But in Europe, for example, Mr Trump’s policies have jolted the continent out of its slumber and dependency, compelling the EU to contemplate strategic security independence, especially in light of Mr Trump’s disruptive approach to Nato, and to reinvent itself economically and socially.
Contrary to what some believe, this could prove beneficial for Europe, rather than catastrophic. Moreover, the US is unlikely to be on the verge of withdrawing from Nato, as some fear. Rather, Mr Trump is rearranging the Nato house in a way that preserves the strategic alliance, but on terms of greater equity regarding its upkeep costs. His approach is more innovative in geopolitical thinking and less conventional when addressing major issues such as the relationship with Russia and the trajectory of the war in Ukraine.
All countries will be on alert now because of the tariffs, examining their options, tightening belts and weighing whether they should impose retaliatory measures or back down and pursue negotiation and diplomacy with the Trump administration, rather than entering a deep and costly confrontation. India, for instance, will find its path. Europe will likewise manage to overcome the difficulties thanks to its large internal market and economic base. Mexico will suffer, and Canada will also pay a price. As for the economies of the Middle East, one of their greatest concerns will be the possible compounding effect of any US confrontation with Iran.
Despite his confidence in the success of the tariff war and his belief that it will restore American greatness and prosperity, Mr Trump is aware of the possibility that this gamble could fail and that the dream could turn into a nightmare for his policies. Therefore, he will need a political victory to compensate for the potential losses resulting from the tariff war.
This is where Iran comes in. It offers Mr Trump the most promising opportunity, whether through a new deal with clear Iranian concessions, or a military confrontation. A war with Iran would devastate the Iranian and potentially the regional economy, but not the American economy. A victory in a war against Iran could overshadow any internal economic hardship in the US, even if such hardship is temporary and lasts a year or a year and a half from now.
Currently, we are still in the countdown phase, either towards confrontation or towards concessions. Tehran understands the implications of the tariff war and its ripple effects on its allies and markets, and thus, on itself. It is also aware that Mr Trump is not bluffing when he threatens a painful military strike against Iran and its nuclear facilities if it persists in its obstinacy.
Hence, Iran is exploring less costly exits. Some Iranian officials have been leaking about their willingness to abandon the Houthis in Yemen as a goodwill gesture towards the Trump administration, in the hope Washington will show leniency towards Iran’s core nuclear programme, thereby preserving the regime, even if in a modified and diluted form.
The British newspaper The Telegraph recently cited a “senior official” in Iran saying Tehran could cease its support for the Houthi group. This comes as the US intensifies its air strikes against the Houthis.
If it is true Tehran is reassessing its policy towards its “proxies” in the region to avoid incurring Mr Trump’s wrath, then that would indicate that the Iranian leadership has finally come to understand the seriousness of the situation. It would mean they now realise they have no choice but to abandon a key pillar of their regime – namely, the strategy of using proxies and militias as a regional tool to achieve domination and export the ideology of the Iranian revolution.
Still, there is little sign that Iran’s rulers have definitively and comprehensively made such a decision. The prevailing sentiment is that Tehran is manoeuvring. Even if it is prepared to sacrifice its Houthi tool, its arm of influence in Yemen and a pathway to maritime dominance and the Bab Al Mandeb Strait and surrounding areas, there is suspicion that these are temporary measures in Iran’s mind. Furthermore, they did not arise out of Iran’s own initiative, but rather as a result of mounting US determination to dismantle the Houthi militias and eliminate their leadership and capabilities.
Moreover, as long as Iran’s Islamic Revolutionary Guard Corps continues to reassert its presence in Syria to regain a foothold there, as long as it clings to the Popular Mobilisation Forces in Iraq and as long as IRGC officials carry out field operations in Lebanon to fund and revive Hezbollah, then confidence in Tehran’s willingness to abandon the doctrine of proxies and armed extensions is virtually null.
