A costly war and a debt crisis: Is a new ‘Trump shock’ coming?

The United States is confronting two pressures at once, a costly war involving Iran and a Treasury crisis, according to Hankyoreh senior international affairs writer Jung E-gil. The column presents the combination as an echo of the dollar crisis of the early 1970s.

During the Vietnam War, the United States faced a trade deficit as Japan and Europe grew more competitive. War spending also widened the fiscal deficit, fueled inflation and weakened the dollar. The crisis culminated on Aug. 15, 1971, when President Richard Nixon suspended the dollar’s convertibility into gold at $35 an ounce, creating what became known as the Nixon shock. The 1973 oil shock then intensified the strain.

The column says Washington eventually restored its position by building the petrodollar system and reshaping its industrial economy. The United States moved away from less competitive heavy industries while expanding high technology and financial services. That model allowed American companies to retain control over design and operations while shifting capital-intensive production, including chipmaking, to countries such as South Korea and Taiwan.

The arrangement helped China rise from the world’s factory into a high-technology competitor, while the loss of U.S. manufacturing jobs fueled anger among lower- and middle-income white Americans. The column argues that this anger contributed to Trump’s rise and that his policies eventually pulled the United States into war with Iran.

That conflict, it says, has exposed shortages in U.S. munitions. The country’s hollowed-out manufacturing base struggles to build even a single seafaring ship, while only four or five of its 11 aircraft carriers are operating. Iranian drones and missiles have reportedly consumed between 30% and 80% of U.S. stocks of expensive precision-guided weapons, which the column says will take six years to replace.