To TACO or Not to TACO, That is the Question

In my blog post yesterday, I wrote "If oil prices continue to rise and the markets crash, Trump will likely TACO faster than he has ever TACO'd before." As I was writing, oil prices were receding somewhat from highs that they had reached overnight, but were still over $100 a barrel. The stock market opened down, but it was far from crashing. Nevertheless, it soon became evident that cult leader, convicted felon, and failed President Donald Trump was even more sensitive to the oil prices and the market than I had expected. Yesterday afternoon, he gave every indication that he was ready to TACO (Trump always chickens out). However, about two hours later, Trump reverse TACO'd. Was this simply cynical manipulation of the news media, an indication of rapidly changing policies, or a sign that Trump simply has no clue what he is doing? My guess is the latter. As I have repeatedly written, Trump is not cognitively fit for his job. He can't adequately explain why he started the war, what he hopes to achieve from it, or how he expects it to end. Yesterday's TACOing and de-TACOing were a demonstration of Trump flailing about, chasing short-term goals and looking no further than the end of his nose. As far as the war goes, the United States is completely rudderless.

In December, West Texas Intermediate Crude was selling for less than $60 a barrel. On February 6, the Dow Jones Industrial Average closed above 50,000 for the first time ever. There were plenty of signs that the economy had problems, but at least these two indicators were positive. An important thing to understand about oil prices is that the market is global. If oil production in the Middle East gets disrupted, it doesn't just impact the price of oil in the Middle East. Even oil extracted from wells in Texas increases in price. In addition, oil is essential to the economy. Not only because it is refined into gas to power cars and trucks, but because petroleum is used in so many other products. Iran sits in the midst of one of the world's most important oil-producing regions and abreast the critical Strait of Hormuz, through which about 20% of the world's oil travels. Any planning for a war against Iran should have accounted for increasing oil prices and the impact that would have on the economy. By all appearances, the Trump administration failed in this basic task.

When the United States and Israel attacked Iran, Iran immediately announced the closure of the Strait of Hormuz. This sent oil prices skyrocketing. West Texas Intermediate soared to over $109 a barrel at one point yesterday. The stock market opened down, and the Dow Jones Industrial Average fell to 46,616. This appears to have sent Trump into panic mode.

Since launching the war, Trump has eschewed traditional press conferences for the most part and, instead, engaged in short telephone calls with reporters. This allows Trump to make a quick point and then get off the call. Whatever point he made gets broadcast as "breaking" and "exclusive" and has given Trump significant influence over the media narrative. Never mind that the "breaking" and "exclusive" reports often contradict each other. Trump has been playing the media like trained monkeys. Therefore, with economic disaster looming, Trump accepted a call from CBS News correspondent Weijia Jiang. As Jiang would almost immediately tweet:

NEW—In a phone interview, President Trump told me the war could be over soon: “I think the war is very complete, pretty much. They have no navy, no communications, they’ve got no Air Force.” He added that the U.S. is “very far” ahead of his initial 4-5 week estimated time frame.

So there it was. Trump was TACOing and a lot sooner than I had expected at that. The stock market immediately reversed with the DJIA closing up for the day at 47,893. Oil prices dropped as well, falling to less than $86 a barrel briefly. It was remarkable how thoroughly investors seemed to accept that Trump had TACO'd and the war would soon be over.

To be clear, Trump's remarks to Jiang did not in any way reflect the reality of the war. None of the goals for the war that Trump had previously announced had been met. Iran had not renounced its nuclear weapons program. Missiles and drones were still being launched against Israel and other targets. The Iranians had even ignored Trump's demand to choose the country's next ruler, announcing that Mojtaba Khamenei would succeed his slain father as Supreme Leader. Trump had earlier explicitly ruled out the younger Khamenei. Less than an hour before Trump talked to Jiang, the Department of Defense had tweeted a post saying "We have Only Just Begun to Fight." Trump was clearly winging it.

As I have written before, the war started because Trump decided it should. There is simply no reason beyond that. By one count, 17 different explanations for going to war have been provided by Trump administration officials. But really only Trump knows why, and he can't explain it. Similarly, because the administration cannot consistently articulate goals for the war, Trump can simply decide to declare success whenever he wants and end the war. Well, sort of. One thing that Trump often forgets about war is that the other side also has a vote. But setting that aside for a second, Trump can claim at any time that the goals of the war have been accomplished, and nobody will be in a position to argue because the administration's stated goals have been so amorphous. That's what it looked like had happened yesterday afternoon.

But it was not long before Trump started backtracking. The Wall Street Journal reported that Trump said that he was open to Mojtaba Khamenei being killed if he did not cede to U.S. demands, something that Khamenei is unlikely to do. Mojtaba Khamenei has long been considered a hardliner who is much more militant than his father. Now that the U.S. has killed both his father and his wife, Khamenei is unlikely to be in a conciliatory mood. Speaking to Republican members of Congress who had gathered at Mar-a-Lago, Trump referred to the war as "a little excursion" and emphasized that it would be a "short-term excursion", repeating "short term" several times. Some of the enthusiasm about Trump TACOing began to dissipate. "Short-term" is not immediate and leaves room for the war to continue longer than investors would like.

Then, after markets were closed, Trump held a press conference. While Trump seems to enjoy jousting with reporters and constantly accuses them of asking unfair questions, for the most part, press conference questions are relatively easy and not particularly pointed. This time, things were different. A reporter pointed out that Trump had said the war was "very complete," but his Defense Secretary just said that "this is just the beginning." "So, which is it?" the reporter asked. Trump's answer was "both." He went on to say that "we could call it a tremendous success right now," but "we are going to go further."

Throughout the press conference, Trump wavered between stressing how much had been accomplished by the U.S., implying that the war could soon be over, and then insisting that there was still more to do. At one point, Trump said that "we haven't won enough." A reporter then asked, "What do you consider enough?" Trump's response was only to say "Where they're not gonna be starting the following day to develop a nuclear weapon."

Perhaps the most dramatic point of the press conference came when Shawn McCreesh of the New York Times asked Trump about the attack on the girls' school in Minab, Iran, that killed over 150 school girls. While it has become increasingly clear that the U.S. was responsible for the attack, Trump has said that Iran was behind it. When Trump called on McCreesh during the press conference, the reporter said:

You just suggested that Iran somehow got its hands on a Tomahawk and bombed its own elementary school on the first day of the war. You are the only person in your government saying this. Even your defense secretary wouldn't say that when he was asked, standing over your shoulder on your plane on Saturday. Why are you the only person saying this?

Trump's response was "Because I just don't know enough about it. I think it's something that I was told is under investigation." He later said that he would accept whatever the investigative report shows. This was an admission by Trump that he has been lying when he has said that Iran destroyed the school.

What was clear from the press conference was that Trump's statement to Jiang earlier in the day was a desperate attempt to stop the carnage in the oil and stock markets. It worked. Both markets changed course. But Trump's later press conference showed that he had not TACO'd. In fact, what became clear is that not much had changed. All along, Trump has been suggesting that the war might last four to five weeks. After Trump's press conference, that seemed likely to still be the case. 

Another interesting development was a press conference held by Secretary of State Marco Rubio. I have repeatedly written that one of the greatest challenges for Trump officials is not to get caught zigging while Trump is zagging. Unfortunately for Rubio, he appears to have been a step behind yesterday. In his press conference, he listed the objectives of the war as being:

• Destroy their ability to launch missiles
• Destroy factories making these missiles
• Destroy their navy

Notably missing from this list was anything about Iran's nuclear weapons ambitions, the one item that Trump mentioned in his press conference. In fact, according to Trump, everything on this list has already been accomplished. Also, missing was anything about the aspirations of the Iranian people for freedom. The Iranian expats in the U.S. who have been wildly celebrating the war are likely disappointed by this omission.

As I mentioned earlier, Trump seems to forget that in a war, the other side also has a say. In this war, the Iranians not only show no sign of being defeated, they appear eager for it to continue. As I have previously written, Iran has no illusions that it can defeat the U.S. militarily. Rather, its strategy is to create an economic situation so difficult that it becomes too painful for the U.S. to continue the fighting. Iran is doing this by strangling oil exports from the Gulf by closing the Strait of Hormuz, but also by bringing economic activities in the Gulf Arab states to a standstill. There have been multiple reports this morning suggesting that Iran has no interest in ending the war. For instance, Reuters reports that the German Foreign Minister said that "What we hear from Tehran is that they are not ready for a diplomatic solution." Bloomberg has an article headlined "Iran Is 'Absolutely' Not Seeking a Truce, Official Says". The AFP News Agency reports that "Iran will continue missile attacks for as long as necessary, says foreign minister, adding negotiations with the US 'no longer on the agenda'." The result is that even if Trump wants to TACO, he probably can't.

What is clear is that this war has not gone the way that Trump expected it would. It is no longer fun for him, and he is ready to move on to overthrowing the Cuban government. However, as much as he would like, it is simply not possible for him to TACO. The result is the flailing we saw yesterday. He manipulated Jiang and CBS News into convincing investors that he was about to TACO. But after markets closed, he made clear that nothing had really changed and that, in fact, he actually has no idea when the war might end. Realizing that Iran can squeeze the world economy, Trump resorted to threats to hit Iran "TWENTY TIMES HARDER than they have been hit thus far" and saying that "Death, Fire, and Fury will reign upon them". Beyond his sounding like a raving lunatic, it is not clear that the Iranians really care about Trump's rants. As I am writing this, there is a report of an oil tanker explosion near Abu Dhabi.

One lesson from yesterday is that Trump lies and ad libs. He says what he thinks will help him at the moment. He has no comprehensive plan for what to do next. Reporters really need to become more skeptical in how they report on their telephone conversations with Trump. As we witnessed yesterday, Trump is perfectly willing to manipulate them. A more encouraging tactic was demonstrated by the New York Times' McCreesh. The bottom line is that yesterday, Trump fake TACO'd to save the stock market. But the war goes on.