A clear success
It has been only a week since the Trump administration made the bold decision to take out the Iranian nuclear facilities, but we find it hard to conclude at this stage that it was anything other than a military and foreign policy masterstroke.
There was early skepticism about the extent to which the bombing raid disabled Iran’s nuclear ambitions, with various news outlets reporting on a leaked Pentagon assessment that allegedly downplayed the damage.
But subsequent information from the administration as well as independent agencies in recent days demonstrates that the operation was highly effective.
We may or may not get a more complete picture of exactly what was destroyed as time passes, but at this point it almost does not matter. Iran has effectively surrendered and is now pursuing a diplomatic course with the U.S. and Israel.
The United States has also demonstrated near-total military dominance over Iran.
In theory, Iran could in the future reboot its nuclear activities. But the U.S. has shown that it has the technological ability and willingness to engage in military strikes that could undo whatever progress the regime may make.
Perhaps as importantly, the U.S. has shown that it can take such actions with essentially no repercussions.
As we discussed earlier in the week, Iran did “retaliate” by launching a few missiles at Qatar. But this was merely a face-saving gesture, given that the Iranians provided advanced warning and the missiles could easily be shot down.
We also saw a few mildly worded, and probably half-hearted, condemnations from U.S. adversaries in the aftermath of Operation Midnight Hammer.
Notwithstanding these official statements, we suspect the main takeaway of regimes around the world is renewed respect for U.S. military capabilities—a marked contrast from the botched Afghanistan withdrawal less than four years ago.
China cuts a deal
There has been no global turmoil. To the contrary, within days of the attack, the U.S. made major progress in its trade negotiations with China, its main geopolitical rival.
Under the leadership of Treasury Secretary Scott Bessent, talks have been underway between the U.S. and China for several weeks.
The most recent breakthrough relates to the ability of American firms to access magnets and rare earth minerals that are necessary for semiconductor manufacturing and other technological applications.
Markets cratered in early April in the wake of the high Liberation Day tariff rates that were proposed, but investors now appear to be gaining confidence in the Trump administration’s use of tariffs as a mechanism for advancing U.S. economic interests.
One widely followed macroeconomist, Torsten Slok of Apollo Management, suggested recently in a memo that has received a lot of attention that the market may have gotten Trump’s tariff policies totally wrong back in April.
