Nomura Gu Zhaoming: The "Iran War" occurred a few days after Trump lost the "Supreme Court Tariff Battle," which is no coincidence.

Ask AI · How does Gu Chaoming analyze the link between war timing and tariff setbacks?

Over the past few weeks, market attention has shifted rapidly from U.S. tariffs to the Middle East oil price crisis.

Nomura ties two threads together: after the U.S. Supreme Court ruled that “reciprocal tariffs” are unlawful, the Trump administration’s core policy from its first year suddenly becomes ineffective; and a military action against Iran that erupted a few days later forcibly displaces the tariff-refund and accountability controversies that would otherwise have continued to simmer—yet the cost is pushing the world toward a more typical supply shock.

According to reporting from Chasewind Trading Desk, in a research note dated the 24th, Gu Chaoming, the chief economist at Nomura Research Institute, said bluntly that after the Supreme Court ruling, the Trump administration is still preparing to swap legal grounds and launch another round of tariff offensives—“This approach not only cannot reduce uncertainty; it will instead amplify uncertainty, which is the worst possible outcome for businesses and the overall economy.”

In Gu Chaoming’s framework, “uncertainty” is not an abstract concept—it has already mapped onto hiring and growth. The Federal Reserve Beige Book describes hiring across multiple regions as “extremely weak”; the February employment report shows employment fell quarter-over-quarter by 92,000; and the U.S. GDP growth rate in 2025’s fourth quarter was also revised down from the initial 1.4% to 0.7% (annualized based on quarter-over-quarter change). With the tariff legal battle not yet wrapped up and negotiations set to be reopened, companies find it even harder to decide to expand.

Then comes Iran and the Strait of Hormuz. Gu Chaoming juxtaposes the war’s timing with tariff setbacks: after the war begins, coverage about the Supreme Court ruling and tariff refunds nearly disappears; while with the strait blocked, supplies of oil, LNG, and fertilizer are all disrupted at the same time—Asia faces not just “higher oil prices,” but also “cargo can’t get through.” What he ultimately offers is a rather pessimistic combination: tariffs remain unresolved, layered on top of supply contraction in oil, gas, and agricultural input products—continued declines in global economic momentum are almost unavoidable.

The Supreme Court ruling zeros out the tariff impact and leaves a $300 billion refund shortfall

Gu Chaoming believes the Supreme Court ruling on February 20 is a “fatal blow” to the Trump administration: reciprocal tariffs are ruled unlawful, meaning the policy that poured the most political resources into the president’s first year has completely collapsed. What’s even more troublesome is consequence management— the government may need to return tariff revenue of roughly $300 billion to date, and that in itself is enough to generate fiscal and political turbulence.

Next, even if they want to “re-legislate and fight again,” Gu Chaoming doesn’t think it will be efficient. The U.S. Treasury Secretary previously hinted that new legal grounds would be sought, but the new statutory provisions either come with time limits or require detailed investigations for every industry/product, so the process is destined to be slower and more labor-intensive. Gu Chaoming specifically emphasized a variable that’s easy to overlook: after officials in charge of executing tariff negotiations suffer a setback from having their “legitimacy denied,” their morale will take a hit, and it will be hard to restore the prior momentum for the talks.

“Lack of trust” among the counterparties to the tariff negotiations is accumulating, and even what was previously agreed on becomes hard to pin down

Gu Chaoming shifts the lens to America’s negotiation counterparts: over the past year, leaders of countries and negotiation representatives have invested substantial political capital to accept the Trump administration’s demands; now, once they suddenly learn those demands lack legitimacy, it’s hard not to generate resistance and suspicion.

A more practical challenge is this: in prior negotiations, which “already agreed items” will remain effective, and which will be overturned in the next round? Gu Chaoming’s view is that the legacy of the Trump administration’s first year is not some “new order,” but even higher uncertainty. For businesses, this is harder to digest than the tariffs themselves, because it removes the stable anchor for pricing, investment, and hiring.

Employment data tells the same story: in the face of uncertainty, companies choose “not to hire first”

**Gu Chaoming puts his evidence for “the economy slowing down” into employment rather than GDP: **The Beige Book says that, except for a few regions, employment has been basically flat over the past several months, and in some regions it has even declined; the February month-over-month drop of 92,000 in employment is consistent with this. On the GDP side, 2025’s fourth-quarter growth was revised down to 0.7% (annualized based on quarter-over-quarter change), which aligns with the weakness seen on the employment side.

He also cites remarks by Powell at the press conference after the FOMC meeting on January 28: employment often reflects the true temperature of the economy better than GDP figures after complex statistical processing. From this, Gu Chaoming infers that the likelihood of the U.S. economy “significantly slowing” is high, and one of the reasons the Beige Book explicitly points to is uncertainty caused by tariff policy; with the Supreme Court ruling and the White House choosing to “fight again,” this uncertainty can only keep rising.

Gu Chaoming’s key speculation: the timing of the Iran war may serve to “shift from defense to offense”

Against the backdrop of “tariffs ruled unlawful and refunds required,” Gu Chaoming offers a clear personal guess: the war breaks out on February 28, just a few days after the Supreme Court ruling—making it hard to believe it is purely a coincidence. For Trump, refunds and follow-up questions about responsibility would put him in a passive position; but he is better at using sudden actions to seize control of the agenda.

Gu Chaoming provides three clues supporting his suspicion:

• Negotiations are still ongoing: The United States is still negotiating with Iran up to the day the war breaks out, and there are hardly any signs of “talks about to collapse”; using force while talks have not broken down would seriously damage America’s national credibility, and it also looks more like “rushing for time.”
• Secretary of State Rubio’s explanation backfires: Rubio said the U.S. found out that Israel planned to strike first and was concerned that U.S. military facilities would be retaliated against, so it chose to join in with a preemptive move. Gu Chaoming believes this amounts to admitting the U.S. is moving in Israel’s rhythm, triggering backlash within the U.S.—even Netanyahu publicly called his claim “absurd.” Based on this, Gu Chaoming speculates that for Trump, who is eager to start the war, Israel’s plan becomes a “window.”
• Signs of insufficient preparation: After Supreme Leader Khamenei was killed, Trump talked about “pro-America figures being mistakenly killed in airstrikes,” and Gu Chaoming reasons that if the U.S. were truly betting long-term on these people, it would normally try to avoid having them appear at strike locations; the complete absence of such arrangements looks more like a rushed decision. Gu Chaoming also mentioned that Joe Kent, director of the National Counterterrorism Center, who resigned in protest on March 17, said it seems there were contacts from the Israeli side requiring the U.S. to join the war.

The Strait of Hormuz is not a problem that can be solved just by “dispatching escort fleets”: cheap drones flip the cost structure

In Gu Chaoming’s narrative, one of Trump’s misjudgments about Iran is underestimating the likelihood that Iran will blockade the Strait of Hormuz. The Wall Street Journal reported that senior U.S. military officials had warned about the problems caused by a blockade, but Trump ignored the warnings and pushed forward with the war. After the blockade occurred, his stance also changed: from claiming that “we don’t need allies like the UK” to welcoming support from a British aircraft carrier strike group, and asking Japan, South Korea, and Europe to send warships to escort tankers.

Gu Chaoming believes the core difficulty is not “not enough ships,” but a mismatch in technology and costs: Iran may use cheap, easily mass-produced drones, and if it launches them at large scale at the same time, the number of expensive intercept missiles aboard escort vessels may be insufficient. More troublesome is that drone engines can be converted from motorcycle engines, with launch producing almost no traditional rocket-like hot signature, making it difficult for reconnaissance satellites to lock onto firing positions in time. These risks are precisely the focus that senior U.S. military officials may be trying to remind Trump about.

The supply shock has already spread to shipping fuel, fisheries, and fertilizer: more like a “stagflation puzzle”

Gu Chaoming describes the economic consequences of the strait blockade in concrete terms: the Strait of Hormuz’s crude oil throughput is reportedly about 20% of global totals, and energy demand has low price elasticity—just this item alone could push prices higher and amplify volatility.

He lists several spillover effects already appearing: Singapore, as an important shipping hub, saw bunker fuel oil prices briefly approach nearly doubling and remain at a high level with ongoing volatility; due to a lack of stable bunker fuel supply, the Port of Bangkok in Thailand banned refueling for foreign vessels; the doubling of fuel costs also made many fishing vessels unprofitable, and some fishing companies have already suspended operations for boats performing poorly.

More sharply is the agriculture side: Gu Chaoming points out that one quarter of the fertilizers used in global agriculture are produced in this region, and the blockade causes supply to stall. If it continues, global grain output could be seriously harmed, and inflationary pressure would rise accordingly. He said directly that compared with the grain price increases boosted in the initial stage of the Russia-Ukraine conflict, if this drags on, the world may face a more severe food crisis, ultimately heading toward a stagflation pattern of “supply declines and inflation accelerates.”

Trump uses “buying Russian oil” to squeeze gasoline prices; Europe sees an inversion of value prioritization

After the blockade pushed up U.S. gasoline prices, Trump quickly lifted the ban on Russian energy and allowed purchases of Russian crude oil. For Europe, this is the shock: after the Russia-Ukraine conflict, Europe immediately stopped buying Russian oil and gas, absorbing skyrocketing energy prices and economic losses, yet it still puts supporting Ukraine and so-called Western values ahead of everything else. Meanwhile, Trump’s move sends the opposite signal—preventing U.S. gasoline prices from rising takes priority over geopolitical principles.

Gu Chaoming also compared two psychological thresholds for gasoline prices. During the Biden era in 2022, U.S. gasoline rose from around $2 per gallon to about $4 at one point; this time, after gasoline exceeded $3 per gallon, Trump chose to buy Russian oil. Based on this, Gu Chaoming judges that Trump’s tolerance for economic pain may be lower than outsiders think, and he may find it even harder to endure “re-inflation caused by the war he started.”

The most likely direction is a “quagmire”: Trump has only eight months, and Iran will likely go into a war of attrition

Regarding subsequent military developments, Gu Chaoming believes the most likely outcome is not a swift victory but getting bogged down in a quagmire like the Iraq War during the Bush era: Iran has a larger territory, a longer history, and is a multi-ethnic country, making it difficult to reshape a regime through airstrikes alone. If the aim is to push for regime change, it requires efficient coordination with domestic reform forces or anti-regime forces, but Trump’s statements suggest that the “pro-U.S. figures” the U.S. originally bet on have already died in the airstrikes, further raising the difficulty of operations. Even if ground forces are deployed, the result could still drift into long-term entanglement like Iraq or Afghanistan.

Time is not on Trump’s side: there are only eight months until the midterm elections, and some of his supporters originally opposed long-term involvement in governing other countries. Gu Chaoming believes Trump is effectively facing two paths—either gamble on achieving military victory within eight months (which would entail mobilizing large-scale ground forces, occupying vast territory, and leaving little time); or announce as soon as possible that the initial objectives have been achieved and withdraw troops. But Iran clearly understands this time constraint, and it is likely to choose a war of attrition, dragging the window for victory beyond reach.

Even if Trump “declares victory and withdraws,” the strait may not reopen; the dual blows of tariffs and oil prices continue to push downward

Gu Chaoming does not believe that a policy pivot—something Trump is good at—will necessarily clean up the mess. He notes that markets even gave Trump the nickname “TACO” (Trump Always Chickens Out) for the way he “changes course whenever he wants.” After Trump proposed high reciprocal tariffs on April 2, 2025, U.S. stocks, U.S. Treasuries, and the U.S. dollar suffered the “three slaps,” and wealthy Republican donors called to threaten to stop donating; then Trump quickly changed course and announced a 90-day ceasefire, after which the market repaired itself.

But this chess match with Iran is different: withdrawing troops does not mean Iran will reopen the Strait of Hormuz. Gu Chaoming wrote that Iran may require first repairing damaged facilities such as those on Khark Island and domestic infrastructure before agreeing to reopen. Accordingly, on the one hand, Trump demands that Israel not strike Iran’s energy facilities (otherwise Iran would have even less incentive to reopen); on the other hand, he issues a final ultimatum to Iran: reopen within 48 hours, extend it to five days, otherwise it will destroy Iran’s power generation infrastructure. This effectively raises the stakes: if Iran does not yield, the U.S. military would be forced to strike facilities crucial to ordinary people’s lives, further worsening bilateral relations—and the probability that the strait stays closed long-term would actually be higher.

In the wrap-up, Gu Chaoming puts “external war developments” alongside “internal constraints.” Amid the legal dispute between the Federal Reserve chair and the Trump administration, Chair Powell announced that even after stepping down as chair, he will remain a member of the board of governors; in the most recent FOMC meeting, the decision to hold steady due to inflation risks had only one dissenting vote, while the other two governors appointed by Trump sided with Powell. Some Republican senators even said they would not move forward with confirmation hearings for the successor nominee Wosch if Trump does not withdraw the lawsuit. Gu Chaoming’s conclusion therefore reads more like an alert: the tariff overhang remains unresolved, a new oil and gas crisis has begun, the Trump administration’s “momentum” is declining, and global economic conditions—including in the United States—are likely to slow further as well.