Could the US be about to seal a deal with Iran?

Any other day, any other week, and the revelation would have dominated headlines on both sides of the Atlantic. With leaders the world over preoccupied with the turmoil caused by President Donald Trump’s tariffs, however, the news that the United States had made overtures to Iran and that direct talks were to take place on Saturday had to take a much lower billing.

It has to be stressed, nonetheless, how much of a departure this is. It represents a far bigger turn in recent US policy than Trump’s first phone call to Vladimir Putin last month, which ended more than three years of isolating the Russian president following Russia’s invasion of Ukraine. It may not be quite “Nixon to China”, but it has the potential to transform the politics of the region and beyond.

The United States and Iran have had no diplomatic relations since Iran’s Islamic Revolution in 1979, when student revolutionaries held US diplomats hostage in their Tehran embassy for 444 days. There have been almost no contacts since, with one exception: the nuclear agreement, formally known as the Joint Comprehensive Plan of Action (JCPOA), which committed Iran to limiting its nuclear activity to civil energy in return for the lifting of sanctions.

The US was a party to this agreement as a permanent member of the UN Security Council, but it had little effect on bilateral relations, and Trump withdrew the US from the treaty in his first 18 months as president, accusing Iran of violations. There is then a particular irony that it should be Trump, at the start of his second term, who is broaching talks on a new Iran nuclear treaty.

There are, though, many reasons why such a move could make sense and might even have a chance of success.

Trump has a liking for the grand gesture, and initiating talks with Iran after nearly half a century is surely that. As was how the disclosure was made: almost in passing during an on-camera meeting with Benjamin Netanyahu, an Israeli prime minister who has long seen Iran as an existential threat to his country. Last October, he authorised reprisal raids against an Iranian nuclear facility, and during his tenure, the threat of an all-out Israel-Iran war has never seemed far away.

That ever-present risk may be one reason why Trump has decided to talk to Iran, but other strategic and practical considerations militate for a change of policy now.

As seen in his first term, Trump has a way of focusing his foreign policy on just a few countries that he sees as particular sources of trouble, the point being that solving just a few problems can potentially defuse many others. Hence his intended – but thwarted – first-term rapprochement with Russia and his talks with North Korea.

For his second term, Russia again heads the list, with one of the hoped-for by-products being peace in Ukraine. But there were early hints that Iran could be a target for the Trump treatment, given its disproportionate capacity to destabilise the wider Middle East.

And now might indeed be the optimal time. Iran’s theocratic regime is facing more resistance – from women and young people – than it has for many years, and sanctions have left the country dangerously impoverished. The days of the Supreme Leader, Ayatollah Khamenei, now in his mid-eighties, may also be numbered.

Regionally, Iran’s reach is nothing like it was only two years ago. Israel’s response to the 7 October attacks has included attempts to destroy not just Hamas, which had some support from Iran, but Iran’s powerful proxies, the Hezbollah militias in southern Lebanon. The sudden end of the Assad regime in Syria has left Iran without either the influence or the land corridors it had before.

There have also been signals, chiefly from the relatively new president, Masoud Pezeshkian, that Iran could be open to a rapprochement with the West. His speech at the UN General Assembly last September could be read almost as an overture to the US and Europe, and he has kept his job without any significant rowing back.

As yet, it is unclear whether any of this could translate into a readiness in Iran to consider a new nuclear agreement. Tehran has cast doubt on whether this weekend’s talks will be “direct” and insisted that there will be no concessions on nuclear policy.

What is clear, though, is that Trump senses a rare opportunity to transform relations with Iran and could potentially have others on his side – including Russia. Moscow has long harboured fears of a nuclear-armed Iran on its southern border while maintaining good channels to Tehran. For Trump to include Russia in a new diplomatic process with Iran could be a way of bringing Moscow back into the international fold, especially if the UK, France and Germany, who also underwrote the original nuclear agreement, were involved, too.

Three months into Donald Trump’s term is too soon to envisage Air Force One landing at Tehran airport and the US president descending the steps to a guard of honour, but strange things have happened, including first-term Trump’s stroll into North Korea at the DMZ. And if the stars were so aligned, it is not impossible that Trump could leave office having normalised US-Iranian relations, even if a new nuclear agreement remained a step too far.

Trump has made China appear a beacon of free trade

The Chinese Communist Party, apostle of free trade. In a strange new world, that was the strangest thing, as shares crashed in reaction to President Donald Trump’s opening salvo of tariffs in a global trade war.

“The market has spoken,” said the foreign ministry spokesperson, Guo Jiakun, writing in English on Facebook – which is, by the way, banned in China. No double standards there, then. Beijing can always keep a straight face when it matters.

Politically, the Chinese government can scarcely believe its luck. It has stepped forward as a voice of reason and stability in a chorus of discord to promote the false narrative that it has been a model of good behaviour since it joined the World Trade Organisation (WTO) on 11 December 2001, a date that seems destined to live in the textbooks as the peak of globalisation.

The Trump tariffs “are a typical act of unilateral bullying”, complained a spokesperson for China’s Commerce Ministry.

“This approach disregards the balance of interests achieved through years of multilateral trade negotiations and ignores the fact that the US has long gained substantial profits from international trade,” the spokesperson added.

The official news agency, Xinhua, said the tariffs were “a weapon to suppress China’s economy and trade” and told the United States to stop undermining “the legitimate development rights of the Chinese people”.

It would be a mistake to write off Chinese rhetoric. The regime of Xi Jinping is serious and its actions speak louder than words.

Clue: China has listed “legitimate development rights” as one of its “red lines” in dealing with the US. The term is code for the export-led economic model which has propelled the country to the rank of second largest economy on earth since it joined the WTO.

Understand that and you understand that for China this is existential. There could be no greater contrast to the whirlwind in Washington than the disciplined, efficiently executed responses announced by Beijing in nine statements outlining reprisals that went beyond mere numbers.

Xi himself did not deign to speak publicly, let alone do anything as vulgar as posting on social media in capital letters. The Chinese public would have thought it beneath his dignity.

Untroubled by such niceties, Trump swiftly posted to his followers online that “CHINA PLAYED IT WRONG, THEY PANICKED.”

With all due respect to the American president, that is exactly what they did not do. The Xi hit list is ominous because it is well-planned and researched. The “Red Emperor” rules a mandarin class of sophisticated operators who do nothing else but study China’s opponents using every intelligence tool at their disposal.

The easy part for China was to impose reciprocal 34 per cent tariffs on all American imports from 10 April. It also suspended six American firms from exporting to China, launched anti-dumping actions in the medical sector and targeted the US giant DuPont with a probe into potential monopoly practices.

The hard part showed just how thoroughly the Chinese had done their work. No penguin islands or weird mathematics here. They banned the export of “dual use” items, which could have military or civilian applications, to 16 US firms, all in the technology sector.

Their key move was to put export controls on seven rare earth elements “to safeguard national security”. It’s on the public record that some of these are vital to US weapons systems.

The list of rare earths included terbium, which is used to enhance the properties of specialised magnets used in guidance systems, satellites and radar. The magnets are integral to the state-of-the-art F-35 fighter, Predator drones, cruise missiles and nuclear submarines.

Then there’s dysprosium, a rare-earth element of which China controls nearly all the world’s supply. It is used to make high-grade magnets that work in super-heated conditions and is found in the newest semiconductors. Other rare earths on the list are vital to jet engine turbine blades. All will now require special export licences.

China and America are thus in a new kind of war over technology and artificial intelligence. Both Joe Biden and Trump tried to choke the supply of advanced semiconductors to Chinese manufacturers, while China is seeking to choke the supply of raw materials to America’s tech champions.

It’s not hard to see how dangerous this could get. The founder of free-trading modern Singapore, the late Lee Kuan Yew, once told me in an interview that “World War Two was caused because of empires and protectionism”.

He recalled that in the 1940s an oil embargo on Imperial Japan pushed its military leaders into war and he warned that if the West tried to isolate China economically “that is bound to lead to conflict”.

Lee was talking in the 1990s, when China stood on the threshold of globalisation. It joined the WTO only after hard-fought talks. But Charlene Barshevsky, who sealed the deal for the United States, later lamented that the Americans failed to use the WTO to punish Beijing when it broke the rules.

That created the belief that appeasement and elite inertia condemned the American working class to decline, the foundation story of Trump’s movement to Make America Great Again. So it is some irony that the Chinese have just filed a formal complaint about Trump’s tariffs – with the World Trade Organisation.

Michael Sheridan, longtime foreign correspondent and diplomatic editor of The Independent, is the author of The Red Emperor published by Headline Press at £25

The US president must stop his ‘Trump Slump’ becoming a global one

Most shocks in capital markets are, by definition, unexpected. They sometimes derive purely from some almost random-seeming shift in market sentiment, albeit with more deep-set fundamental factors at work. The Great Crash of 1929 and the stock market crash of October 1987 – Black Monday – fall neatly into that category.

Others are more clearly understood in real time, but still a shock: the global financial crisis of 2008 is comprehensible from a distance, albeit famously seen as a “black swan” event. Still others are more purely external – Arab nations imposing an oil curfew after the Yom Kippur war in 1973; or whatever bat, pangolin or Chinese lab assistant was responsible for the coronavirus getting loose.

The Trump tariff crash of 2025 is an altogether unusual affair – one of the few such catastrophes to befall the savings and livelihoods of millions of people caused by the stubbornness of one man.

Because it is Donald Trump – and he alone – who is responsible not only for the substance of his reckless shutdown of US trade with the rest of the world, but the deeply flawed design of the tariff schedules, the practically unprecedented suddenness of their introduction, and the incomprehensible rationale for the policy. Certainly, Mr Trump made no secret of his love for – “the most beautiful word” – tariffs.

But the scale and incompetence that has been attached to his attack on trade has stunned and appalled the world. Worse even than that, it has left people confused.

At one point over the weekend, serious analysts were suggesting that Mr Trump actually intended for the markets to crash. In most cases, this was not a product of the over-conspiratorial minds of the Trump cultists, but because the president himself had reposted a story on social media suggesting that he was “Purposely CRASHING The Market”. A White House spokesperson had to state that the president did not, in fact, deliberately wipe some $8 trillion off the world’s stock markets – another unwelcome precedent set by this president.

The question then arises: “What does Mr Trump think he is doing?” The answer is that no one knows, not even the president.

Some, including the president himself in his unorthodox Rose Garden presentation and his secretary for commerce, Howard Lutnick, suggest that it is all about reindustrialising the United States and generating “trillions” of long-term tax revenues. In his address to workers at Jaguar Land Rover on Monday, Sir Keir Starmer admitted that tariffs are “a huge challenge for our future, and the global economic consequences could be profound”.

Less than comfortingly, Mr Trump compares what he’s putting the previously healthy American economy through to a patient undergoing an operation. Others, occasionally also including the president himself, suggest it is merely another of his brilliant negotiating tactics, and point excitedly to the response of nations such as Vietnam, Israel and Argentina offering zero-tariff deals with America – but which would therefore yield zero returns for the proposed new US “External Revenue Service”.

Put simply, it is a matter of “Tariffs bad – uncertainty even worse”. Businesses and households cannot plan in such an environment, and that means that investment will be frozen for weeks, if not months, and a recession becomes ever more likely.

That is one imminent danger. Another is the way that the market contagion has spread from industrial and resources stocks to the banks, with the obvious worry that the trade recession will soon be joined by its evil twin, a credit crunch. As confidence drains from the world economy, companies are nervous about investing, banks are reluctant to lend, and savers will turn to safer havens than equities. Historically, such security was offered by the United States dollar; now, perhaps, not so much.

One of the great ironies in Mr Trump’s plan to boost the American economy is that, within a fairly short time, he will have plunged it into such a slump that he will need to take emergency measures to rescue it – tax cuts, and increasing the US budget deficit to pay for it. The Federal Reserve may find it has no alternative but to cut interest rates – usually a welcome move, but in this case merely proof of the disaster the Trump administration is inflicting on its people.

The net result may be stagflation: above-target increases while economic activity stagnates. It is analogous to what a combination of the Brexit shock and the reckless Truss experiment that crashed the UK economy in 2022 would do. It is that bad.

What can the authorities, including in the United States, do to prevent a slump? Unlike in 2008 and 2020, for example, in most Western economies, there is far less scope for borrowing at sustainable interest rates to support the economy.

In 2008, when Gordon Brown was prime minister and had to nationalise most of the British banking sector, the UK national debt-to-GDP ratio stood at about 36 per cent. By the time Boris Johnson and Rishi Sunak were faced with closing down the economy in 2020, it was 85 per cent. It now stands at 95 per cent, and trending higher.

If the present chancellor, Rachel Reeves, has barely enough fiscal headroom to keep to her fiscal rules, she will have to find some convincing explanations about the much more onerous costs of nursing Britain through what we may soon be calling “the Trump Slump”. That, of course, is not even accounting for the real cost of deterring Vladimir Putin and helping to defend Europe (that being another direct consequence of Mr Trump’s election).

Much the best move, and one still hoped for, is that Mr Trump accepts the manifold and genuine offers of constructive negotiations he’s had from world leaders, declares an early “victory” for his tactics, and announces a 90-day moratorium during which new, freer trade deals can be reached across the world.

It would be good news for all. The markets would calm, American voters would no longer fear opening their pension fund statements, and Mr Trump might turn his mess into a miracle of trade liberalisation.

The dangers if President Trump does press on with his mercantilist “medicine” for America are too gruesome to contemplate. At times such as this, what else is there other than optimism?