Trump’s folly has unleashed economic chaos worldwide

The evidence is striking and the damage so far is all too evident. But the full extent cannot yet be known. Economic forecasters including the International Monetary Fund (IMF), the Organisation for Economic Cooperation and Development (OECD), the European Central Bank (ECB), the UK’s Office for Budget Responsibility, and many others are all trying to gauge the impact of President Trump’s latest, and biggest folly.

Economies dependent on the smooth flow of trade, taken for granted until Trump and Benjamin Netanyahu offered Iran an open goal with the weapon of the Strait of Hormuz, are reeling from the shock.

Recession? Depression? Stagflation (the combination of economic stagnation and inflation)? The alarm signals are sounding, and not surprisingly.

IMF managing director Kristalina Georgieva has warned that “all roads lead to higher prices and slower growth” and that even the most “hopeful scenario involves a growth downgrade” for the global economy.

Trump seems to have assumed that because, unlike during the energy crises of the 1970s, the US is now self-sufficient in oil, it would not suffer from this major disruption. But the price of oil is subject to trends in world markets, and the cost of living is a serious political issue in the US. Indeed, Trump campaigned on it.

The OECD projects US inflation at 4.2% this year – 1.2 percentage points above its previous forecast. Sustained damage would deal a savage blow to Trump in the midterm elections. With luck, it could make this truly appalling president into a lame duck for the next two years.

We should not be diverted by this latest crisis from the damage Trump has inflicted worldwide with his savage cuts to overseas aid – cuts administered by a man who sees the presidency as a golden opportunity to enrich himself and his entourage; cuts which cause death, ill health and even starvation – a point made forcibly by Tom Fletcher, the UN humanitarian chief.

There has been some speculation that Trump could be removed by invoking the 25th amendment, allowing the president to be declared unfit for office. Despite the speculation about Trump’s erratic behaviour , it seems unlikely that JD Vance and a Maga cabinet will do this – although the New York Times reports that Trump has taken to humiliating Vance in closed sessions. Anyway, Vance has his hands full trying to influence the outcome of today’s Hungarian election.

Where does Britain stand? JP Morgan's chief UK economist noted that the Bank of England has been “scarred by the stickiness of UK inflation versus other economies” and flagged a specific vulnerability: the UK’s high dependence on natural gas. All this is dealing a huge blow to the government’s chances in impending local elections. But his impressive handling of the crisis caused by Trump and Netanyahu should work to Sir Keir Starmer's advantage when it comes to attempts to unseat him. I keep reminding people that Clement Attlee and Harold Wilson both faced internal challenges – but nothing came of such plots. I haven't even mentioned the Blair-Brown period.

Photograph: jim Watson/AFP via Getty