Trump's 'flood the zone' strategy worsens inflation and energy costs

In the early days of the Trump Administration, the expression flood the zone became popular as a political strategy of the White House: overwhelming public opinion with announcements, real measures and almost always controversial statements. An effective mechanism to block the opposition and clear the political agenda, of course, but obviously ineffective in solving problems because, as a premise, that is not the objective. The president arrives at the midterm elections still riding that wave, which necessarily means that he has more and more open fronts and fewer and fewer problems resolved. The cost of living was probably one of the reasons that gave Trump his incontestable victory. Now it is precisely one of the reasons that weakens him politically: inflation is above 3%, diesel marks historical highs at 6.5 dollars per gallon and the rise in debt rates has an impact on the mortgage market. The main cause of this context is Trump himself and his decision to open the canopy of thunder in the Middle East.

True to his style, instead of closing one front, which always entails some type of political cost, he chooses to open another. The possibility of vetoing diesel exports does not even generate consensus in the Administration. First, because it is not clear that it is a good idea: the process of refining a barrel of oil is not as flexible as Trump would like and, if there is less diesel on the market, there will be less gasoline. Thus, if US refineries are not going to be able to sell diesel abroad, they will probably reduce the total supply of hydrocarbons and raise prices. Secondly, the oil industry has significant weight in the party and the Government, and would be greatly harmed by a decision of this type. Europe is not included in Trump's plans, but it would be greatly punished by a decision in this regard, since the United States is the source of a large part of its diesel imports.

Another layer of chaos, in short, on top of that already generated by the war in Iran, the consequences of which Spanish consumers also pay. Financial markets are taking note, both of the prospect of more rate increases due to the impact of fuel and of the limited prospects of the conflict ending. All this translates, thanks also to public deficits, into record interest rates for American debt, installed above 5% in long terms.