Trump controls the economy’s key levers, from oil to the Fed
U.S. President Donald Trump and Japanese Prime Minister Sanae Takaichi during a meeting in the Oval Office of the White House on Thursday, March 19, 2026 in Washington, DC, USA.
Aaron Schwartz | CNP | Bloomberg | Getty Images
Japanese Prime Minister Sanae Takaichi embraced President Donald Trump on Thursday, and not just for policy reasons. The newly elected Japanese leader threw himself into the arms of the US president, who welcomed him to the White House.
“It’s only you, Donald, who can achieve world-wide peace,” Takaichi later said when the two met in front of reporters in the Oval Office. he said.
An important truth lies beneath the flattery. Trump is single-handedly shaping the course of global events to a degree that surpasses even the power he had in his first presidency. While his presidency is unleashed, his military and other policy decisions are reshaping the economy in real time and clouding the economic outlook.
Trump’s predecessors were not willing to make the choice he made on Iran. President Barack Obama’s response to the risk of Iran developing nuclear weapons was to negotiate a multilateral arms agreement. Trump brushed it aside in his first term. President Joe Biden has sought to revive that situation, favoring negotiations and sanctions pressure even after Iran-backed Hamas massacred Israelis on Oct. 7, 2023.
Trump’s decision to use his authority as commander in chief of the military has essentially made him a lever to move global energy prices up or down. Iranian forces attacked cargo ships and attacked their neighbors’ energy facilities.
Traffic stopped in the vital Strait of Hormuz. In normal times, it carries 20% of the world’s crude oil.
Gas prices in the USA It’s up nearly a dollar, or 33%, in the past month, according to AAA. More economic turmoil is coming. The gorge is also a conduit for fertilizer ingredients that are rapidly becoming scarce. The possibility of fertilizer shortages puts U.S. agriculture into “uncharted territory,” a Michigan farmer told CNBC this week.
Trump said he predicted gas prices would rise when he entered the war, viewing it as a price necessary to neutralize the threat of further Iranian aggression, nuclear and otherwise. The White House says prices will fall sharply once the conflict ends. At the beginning of the war, Trump said that the war would last for days. Then weeks. He said Friday he was not interested in a ceasefire.
Prices may indeed fall after the war is over, but for now markets are pricing in a costly war. Futures markets show investors are waiting for this development oil price It is expected to remain above $80 per barrel through July 2027, according to FactSet data.
Markets’ anxiety reflects the risk that Trump, for all his individual power, may no longer be able to end the war quickly. Iran can use cheap drones, boats and mines to threaten ships in the Strait of Hormuz. A land invasion may be necessary to eliminate this threat. Trump said on Thursday that he was not considering ground forces but that the US military was moving more personnel and ships to the region.
A bloody ground war could extend the time it takes for oil prices to return to normal by weeks or months; Increasing conflict could cause further damage to energy production facilities in the region. Whether such an operation will proceed is largely up to Trump. Trump, along with Israeli Prime Minister Benjamin Netanyahu, will decide whether the potential national security benefits of a vulnerable Iran are worth the hit to Americans’ wallets.
Congress may get involved in Iran war
Similar legislation focused on restricting the president’s authority over tariffs gained modestly more support in Congress, but such measures did not become law. In February, the Supreme Court struck down most of the president’s tariffs, but he quickly responded by imposing new ones.
It is the Federal Reserve’s purview to help ensure that inflation remains under control and that workers remain employed despite other changes in policy. Both Iran and tariffs risk creating the inflation problems the Federal Reserve was designed to solve.
Trump’s accumulation of power complicates these efforts.
A new Fed chairman is not expected anytime soon
On March 13, a federal court quashed the subpoenas. A document released by a Justice Department prosecutor over allegations that Trump and his allies misappropriated public funds on an ongoing building renovation project by the Fed. Sen. Thom Tillis, R-N.C., said he would not vote for Kevin Warsh, Trump’s nominee to lead the Fed, until the investigation is resolved. The Fed’s current chairman, Jerome Powell, has said he will remain in office in some form indefinitely as long as the investigation continues.
The judge’s decision on the subpoenas could have been the moment when Powell could switch and allow Warsh in. However, the Ministry of Justice decided to appeal. And Trump appears to support that plan, saying on Thursday he still believes there is “crime” in exceeding renovation costs.
The White House said the Justice Department’s investigation was independent of Trump’s decision. Regardless, the investigation continues, putting the conflict between the president and the Fed at the center of markets indefinitely at a time when Trump’s other policies make the economic outlook as difficult as ever to predict.
The only way to know how many of the biggest policy decisions facing the United States will be overturned is to get inside Trump’s head.
Presidents like to boast about their great influence on the economy, especially when the economy is doing well. It’s often exaggerated. But this economy, warts and all, owes a lot to Trump. Everyone, starting from the Japanese prime minister, is participating in this trip.
