Nomura Ko Chao-ming: "The 'Iran War' happened a few days after Trump lost the 'Supreme Court tariff battle.' This is not a coincidence."
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Over the past few weeks, the market focus quickly shifted from US tariffs to the Middle East oil price crisis.
Nomura ties the two issues together: The US Supreme Court ruled "reciprocal tariffs" illegal, abruptly invalidating Trump’s core policy from his first year; days later, the outbreak of military action against Iran pushed ongoing disputes about tariff refunds and accountability out of the news spotlight—but the price is to push the world toward a more classic supply shock.
According to Wind Trading Desk sources, Nomura Institute’s Chief Economist, Gu Chaoming, stated bluntly in his June 24 research report that after the Supreme Court ruling, the Trump administration was still preparing to find new legal grounds to launch another tariff offensive—"This approach not only fails to reduce uncertainty but rather amplifies it, which is the least desirable outcome for businesses and the economy as a whole."
In Gu Chaoming’s framework, "uncertainty" is not an abstract term: it already reflects in employment and growth. The Fed’s Beige Book described "extremely weak" hiring in many regions; the February employment report showed a month-on-month decrease of 92,000 jobs; and projected US GDP growth in Q4 2025 was revised down from 1.4% to 0.7% (annualized quarter-on-quarter). The unresolved tariff legal battle and reopening of negotiations make it even harder for businesses to commit to expansion.
Then comes Iran and the Strait of Hormuz. Gu juxtaposes the timing of war with the tariff setback: after the outbreak of war, coverage of the Supreme Court ruling and tariff refunds almost disappeared; while the strait closure disrupted the supply of oil, LNG, and fertilizers simultaneously, Asia faces not only "higher oil prices," but "goods not arriving." He ultimately offers a rather pessimistic scenario: unresolved tariff issues compounded by supply contractions in oil, gas, and agricultural inputs make further global economic slowdown nearly unavoidable.
Supreme Court ruling wipes out tariff effectiveness and leaves a $300 billion refund hole
Gu Chaoming believes the Supreme Court ruling on February 20 was a "fatal blow" to the Trump administration: reciprocal tariffs were ruled illegal, signaling that the first year’s policy, where the President invested the most political capital, "collapsed completely." The aftermath is even trickier—the government may need to refund around $300 billion in tariff revenues to date, enough by itself to create fiscal and political turmoil.
Even if they try to "legislate anew and fight again," Gu doubts the efficiency. Treasury Secretary Besant previously hinted at finding new legal grounds, but the new laws would either have time limits or require detailed investigations for each industry/product, inevitably making the process slower and more labor-intensive. Gu particularly emphasizes an often overlooked variable: officials negotiating tariffs, after experiencing a setback where legality was denied, will suffer morale blows, and it will be difficult to regain previous momentum in reopened talks.
Accumulating “distrust” among counterparts makes even formerly agreed terms uncertain
Gu shifts the perspective to the US’ negotiation partners: in the past year, foreign leaders and negotiators invested significant political capital to accept US demands; now learning these demands lack legitimacy, it’s hard not to develop resistance and suspicion.
The more practical challenge is: in the past deals, which "already agreed terms" remain valid, and which ones may be overturned in the new round? Gu’s judgment is that the legacy of Trump’s first year is not a "new order" but greater uncertainty. For businesses, this is even harder to digest than the tariffs themselves, as it destabilizes pricing, investment, and hiring anchors.
Employment data tells the same story: Faced with uncertainty, companies choose “not to hire yet”
Gu puts the evidence of “economic slowdown” more on employment than GDP: The Beige Book says except for a few regions, employment has been basically flat or even declined in some, and the 92,000 drop in February jobs aligns with this. GDP-wise, the Q4 2025 growth rate revision to 0.7% (annualized quarter-on-quarter) corroborates the weakness on the employment side.
He also cites Powell’s remarks at the January 28 FOMC post-meeting press conference: employment often reflects the real economic temperature better than GDP, which is subject to complex statistical adjustments. From this, Gu concludes the probability of the US economy "slowing significantly" is high, and the Beige Book specifically attributes this to uncertainty from tariff policy; the Supreme Court ruling plus the White House deciding to "fight again" will only further increase this uncertainty.
Gu’s key speculation: The timing of the Iran war may be about “shifting from defense to offense”
Against the backdrop of "tariffs ruled illegal, refunds needed," Gu makes a clear personal speculation: the war broke out on February 28, only days after the Supreme Court decision, making it hard to believe it’s mere coincidence. For Trump, refunds and accountability would put him on the defensive; he’s better at grabbing back control of the agenda with sudden actions.
Gu provides three clues supporting his suspicion:
- Negotiations were still ongoing: The US was still in talks with Iran on the day war broke out, with almost no signs of "talks about to collapse." Striking before talks break down seriously harms US credibility and seems more like “rushing.”
- Secretary Rubio’s explanation backfires: Rubio said the US learned Israel would strike first and, fearing retaliation against US facilities, joined the preemptive attack. Gu thinks this is tantamount to admitting the US followed Israel’s pace, triggering domestic backlash, with Netanyahu even publicly calling Rubio’s statement "ridiculous." Gu speculates Trump, eager for war, saw Israel’s plan as an “opportunity.”
- Signs of inadequate preparation: After Supreme Leader Khamenei was killed, Trump remarked "pro-American figures were also killed in the airstrike." Gu infers that if the US truly relied on these individuals long-term, it would typically avoid placing them at strike sites; the complete lack of such precautions suggests hasty decisionmaking. Gu also mentions the National Counterterrorism Center director Joe Kent’s resignation (March 17) with anti-war reasons, indicating possible contacts from Israel requesting US involvement.
Hormuz can’t be solved just by “sending convoy fleets”: Cheap drones flip the cost structure
In Gu’s narrative, One of Trump’s misjudgments regarding Iran was underestimating the possibility of Iran blockading the Strait of Hormuz. The Wall Street Journal reported that US military leaders warned about the dangers of a blockade, but Trump ignored the warnings and pushed forward with war. After the blockade happened, his attitude shifted: from claiming "no need for UK allies," to welcoming UK carrier groups’ support, and requesting Japan, South Korea, and Europe to send warships escorting oil tankers.
Gu believes the main difficulty isn’t “insufficient ships,” but technical and cost asymmetries: Iran may use cheap, mass-producible drones, and if launched en masse, there may not be enough expensive interceptor missiles on escort ships. More awkwardly, drone engines can be modified motorcycle engines, with no strong heat signals at launch like traditional rockets, so reconnaissance satellites can’t easily lock onto launch sites in real time. These risks are precisely what US military leaders likely tried to warn Trump about.
The supply shock has already spread to marine fuel, fisheries, and fertilizer: More like a “stagflation puzzle”
Gu illustrates the economic consequences of the strait blockade in concrete terms: the Strait of Hormuz reportedly handles about 20% of global crude transit, while energy demand has low price elasticity—even this alone might push prices higher and amplify volatility.
He lists several spillover phenomena already taking place: Singapore, as an important shipping hub, saw marine fuel prices nearly double at one point and remain volatile; Bangkok port in Thailand banned foreign vessels from refueling due to unreliable supply; the doubling in fuel prices also made many fishing boats unprofitable, with some fisheries firms suspending underperforming vessels’ operations.
On the agriculture side, Gu points out that a quarter of global agricultural fertilizer comes from this region, and the blockade has stalled supply. If this continues, global grain output could be severely hit, pushing inflation pressures upward. He states that compared to the initial price spikes in grains during the Russia-Ukraine conflict, this time, if prolonged, the world could face a more severe food crisis, ultimately resulting in a “supply decline, inflation accelerating” stagflation scenario.
Trump suppresses gasoline prices by “buying Russian oil”—Europe sees reversed value priorities
When the blockade pushed up US gasoline prices, Trump quickly lifted the ban on Russian energy imports and allowed purchases of Russian crude. To Europe, this is a shock: after the Russia-Ukraine conflict, Europe immediately stopped buying Russian oil and gas, enduring price spikes and economic pain, yet prioritizing support for Ukraine and Western values; Trump’s move conveys the opposite—preventing US gasoline price rises takes precedence over geopolitical principles.
Gu also compares two psychological thresholds for gasoline price: in 2022 under Biden, US gasoline jumped from about $2/gallon up to nearly $4; this time, Trump opted to buy Russian oil after gasoline exceeded $3/gallon. Gu thus judges, Trump’s tolerance for economic pain may be lower than expected and he struggles to endure “re-inflation caused by his own war.”
The likeliest outcome is a “quagmire”: Trump has only eight months, Iran will wage a war of attrition
For the military process to follow, Gu believes the most likely outcome isn’t quick victory, but rather a quagmire like Bush’s Iraq war era: Iran has bigger territory, older history, is multiethnic, and airstrikes alone can hardly reshape the regime; to engineer regime change, close coordination with reformists or anti-government forces is required, but Trump’s previous statements imply that pro-US figures relied on have been killed in airstrikes, raising difficulty further. Even deploying ground troops may lead to Iraq- or Afghanistan-style long-term entanglement.
Time is not on Trump’s side: Only eight months remain until the midterms, and some of his supporters already opposed long-term overseas intervention. Gu believes Trump actually faces two choices—either gamble on achieving military victory within eight months (requiring mass mobilization of ground forces and broad territorial occupation, for which time is tight); or rapidly declare “initial goals accomplished” and withdraw. Iran is keenly aware of this time constraint and will likely choose an attrition strategy to drag out Trump’s victory window.
Even if “withdrawal is declared,” the strait may not reopen; The double shock of tariffs and oil prices continues downward pressure
Gu does not believe Trump’s trademark policy U-turns can necessarily resolve the stalemate. He notes the market has nicknamed Trump “TACO” (Trump Always Chickens Out) for his abrupt reversals: after proposing high reciprocal tariffs on April 2, 2025, US stocks, bonds, and the dollar tanked (“triple kill”), wealthy Republican donors threatened to stop donations, Trump then quickly switched course, announcing a 90-day truce and the market recovered.
But Iran is a different game: troop withdrawal does not mean Iran will reopen Hormuz. Gu writes that Iran may demand restoration of damaged infrastructure such as Kharg Island before agreeing to reopen. Trump therefore requests Israel not to strike Iranian energy facilities (otherwise Iran has even less incentive to reopen), while issuing an ultimatum to Iran: demanding reopening in 48 hours, later extended to five days, or else the US will destroy Iran’s electricity infrastructure. This raises the stakes further: if Iran doesn’t yield, the US will have to strike facilities affecting ordinary people’s lives, worsening bilateral relations and actually increasing the probability of a long-term strait closure.
In closing, Gu juxtaposes “external chaos” with “internal constraints”: Fed Chair Powell, amid legal disputes with the Trump administration, announced he’d remain on the Board after stepping down even as Chair; the latest FOMC chose to hold rates steady due to inflation risk, with only one dissenter, and two Trump appointees sided with Powell; some Republican senators even said if Trump doesn’t drop the lawsuit, they won’t advance confirmation hearings for successor candidate Walsh. Gu’s conclusion thus reads more like an alert: the tariff issue is unresolved, a new oil and gas crisis has arisen, Trump’s “momentum” is waning, and the global economy—including the US—is likely to slow further.
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