In President Trump's perfect world, nation after nation would make trade deals with the US and validate his aggressive tariff strategy. Low energy prices would soothe consumers. Turbulent parts of the world would settle down because the US president insists on peace.

Like virtually every other president, however, Trump is discovering that events can conspire against him. The war between Israel and Iran doesn't affect the US directly — yet — but it demands Trump's attention and may force him to make some difficult decisions. Possible outcomes range from a temporary interruption of Trump's economic plans to an unforeseen crisis that rewrites the playbook.

"Market optimism about a quick Israel/Iran resolution is premature and naive at best, completely wrong at worst," Terry Haines, founder of Pangaea Policy, wrote in a June 16 analysis. "There's not a simplistic binary solution to a multi-dimensional problem here."

Trump set July 9 as a deadline for trade deals with at least 15 nations. That's 90 days after Trump suspended the "reciprocal" tariffs he imposed on April 2 as leverage in trade negotiations. One venue for trade talks was supposed to be the current gathering of world leaders in western Canada, where Trump could have hammered out deals face-to-face with the leaders of Canada, Mexico, France, Germany, Japan, and other nations high on his tariff target list.
But Trump left early to deal with the increasingly grave exchange of fire between Israel and Iran. That will indefinitely delay trade talks, with uncertainty hanging over trade volumes totaling more than $3 trillion. Absent any trade deals, most imports to the US face new taxes ranging from 10% to 50%, with price hikes likely to hit American shoppers within weeks.

Trump faces some momentous decisions on the Iran-Israel conflict that could affect the rest of his presidency. He's talking tough, as if Israel and, by extension, the US have all the cards in the showdown with Iran. "Unconditional surrender," Trump demanded of Iran on social media on June 17. "We now have complete and total control of the skies over Iran." He also said "we" know exactly where Iran's theocratic leader, Ali Khamenei, is hiding out, clearly implying that a US or Israeli airstrike could kill the ayatollah.

Trump is bluffing to some extent. As far as anybody knows, Israeli jets have been attacking Iran without any US assistance since June 13, as Israel tries to eliminate an Iranian nuclear weapons program that could eventually threaten Israel's existence. Trump, in turn, has been trying to get Iran to agree to scale back or drop its nuclear program through diplomacy. What Trump seems to be doing now is threatening that US forces will join the attack unless Iran agrees to unwind the nuclear program on its own. And do it fast.

It's a threat Iran has to take seriously. But it also carries risks for Trump.

Israel lacks the giant "bunker buster" bombs needed to burrow deep into the earth and fully destroy Iran's most hardened nuclear sites. But the US can't just gift Israel some high-end bombs and look the other way. It would most likely take US jets flying near or over Iran to put those bombs on target, making American troops direct combatants in the conflict.

American bombs might be able to kill Iran's nuclear program for the time being. But the "what's next" question is an uncomfortable one. The Iranian regime is in a tight corner, but it's still dangerous. It could attack US ships or bases in the region, possibly killing scores. It could attack energy facilities in oil-producing neighbor states. It could also try to close the Strait of Hormuz, which would lock in roughly 20% of the world's oil supplies.

Iran would ultimately lose if it had to face the US in any of these scenarios. But it could inflict pain, nonetheless. So if Trump were to act on his threats and send US jets over Iran, he'd be unleashing forces he might not be able to control.

Any attack affecting actual oil supplies would cause a price spike much sharper than the $15 per barrel jump in prices that has occurred since Israel first struck Iran on June 13. That would be an inflationary shock felt very quickly by US motorists through higher pump prices and, with a lag, by consumers of many other goods as the rising cost of production and transportation pushed end prices higher.

Trump has promised a permissive, deregulatory agenda meant to ease energy production and bring prices down. Part of his calculus for tariffs, which push prices up, is that falling energy costs would offset prices to the downside. If Trump could no longer rely on that, he'd have to decide whether to go through with tariffs, knowing that the harm to consumers would be greater than he planned for.

In a quagmire scenario, US forces might join the Israelis in directly attacking Iran, and probably demolishing the nuclear program. But Iran could keep oil prices elevated for a while, with repeated attacks on oil infrastructure.

If Trump were to go as far as trying to remove Iran's Islamic regime — which would delight Israel — it would raise the ugly question of whether US troops should enter Iran on the ground.

Recent history suggests the answer should be no. US power helped overturn autocratic regimes in Afghanistan and Iraq, but chaotic tribal warfare ensued in each case, costing thousands of American lives and many more local casualties. Trump himself has railed against US involvement in overseas wars and vowed to be the
For now, Trump seems to be hoping the mere threat of American strikes will cow the Iranian mullahs into giving up their nukes and allow Trump to declare victory. But they're a crafty bunch, even on defense — and Iran's allies Russia and China are no doubt whispering ideas for how to bluff the Americans into calling off the Israelis.

Trump has a strong hand, but the longer a confrontation with Iran drags on, the more it will limit what Trump can do for the economy at home. Trade partners such as Europe and China are looking for every negotiating edge they can get against Trump. As long as he's tied up with something else, they'll be in no hurry to talk tariff. They know time is working against Trump, because the longer his tariffs are in place, the more likely American consumers are to notice — and boo. For some of those trade partners, the Iranian distraction is a welcome delay.