Abracadabra

Commentary by William Alan Reinsch

Published March 16, 2026

"I heat up, I can't cool down
Got me spinning 'round and 'round
'Round and 'round and 'round it goes
Where it stops, nobody knows"

Dating myself, here-this song is from 1982-but I think it's timely. (Side note: I've had a succession of young assistants during my time at CSIS, many of whom can't believe anything culturally important happened before this century. Periodically, I make a lame attempt to acquaint them with music that is prehistoric music-for them. This is one of those times.)

The song, of course, is not about the economy. It's about a girl, sex, and maybe even love, but it's an apt metaphor for what the global economy is experiencing right now-and what has plagued it for the last year-which is embodied in its last line: where it stops, nobody knows. To say the global economy has had its ups and downs would be an understatement, and most of them have been caused by the United States. We've seen tariffs announced, postponed, implemented at levels other than those originally announced, revised, threatened to be revised again on presidential whim, mitigated by exceptions also apparently awarded by whim, and ultimately ruled illegal by the Supreme Court.

The administration is now ramping up its foray into Plan B, which means 10 percent, or maybe 15 percent tariffs for five months, followed by new tariffs that result from new investigations that may or may not lead to the same old tariffs. Where it stops, nobody knows. The one certainty is that there will be more lawsuits, and if they prevail, we will move on to Plan C. Trump is not about to give up on tariffs.

At the same time, amid all that has been happening, the world is currently contending with a war in the Middle East, which is spewing out consequences for practically everybody. Listening to Trump and other administration officials, depending on the hour or day, the war is almost over, or going to take a bit longer, or just getting started. Inflationary effects are either transitory or worth the cost. In fact, the economic impact of the war will depend on how long it lasts. Some 20 percent of the world's oil and gas is currently unavailable because tankers cannot safely transit the Strait of Hormuz or because Middle East producers have shut down their production and refining capabilities. The war itself has also damaged some facilities.

Since oil and gas markets are global, prices have gone up everywhere, but the most immediate impact will be in Asia, where most of that production goes. If the war ends quickly, and oil and gas start moving again, these countries can avoid shortages that will cripple their manufacturing and participation in supply chains that are essential to Western manufacturers. But there will be lingering effects, even for a short war. One is price. Last week witnessed a price spike to $120 per barrel, with the market continuing to fluctuate between $80 and $100, which is significantly higher than before the war started. That price may come down a bit, but it is unlikely to return quickly to levels below $60 that consumers had been enjoying, which relates to the second effect-prolonged uncertainty. The reality of war is that it is never over simply because one side says so. The other side gets a vote, and the history of the Middle East for centuries has been that while ceasefires might occur-and last for some time-war never really goes away. It just pops up again later on with different leaders and different rationales, but, sadly, the same victims.

And that is the core of uncertainty. If you don't know what is going to happen next, you make contingency plans, hold onto your money, and wait for the situation to stabilize, and in this part of the world, that is likely to take a long time. Even a short war will fundamentally change the way investors look at countries previously deemed safe and reliable, like the Gulf states. The war has exposed their fragility, even though they are technically non-participants, and that will have bad economic and political consequences-mainly jeopardizing inbound investment as investors try to reduce risk and restricting outbound investment as the Gulf states focus on internal priorities.

It will be even worse if the war ends up lasting longer. Price increases will become supply shortages that lead to factory closings, primarily in Asia, that, in turn, will force Western manufacturers to once again readjust their supply chains, if they can find locations that are not impacted. Trump's dream of reshoring manufacturing would avoid that, but it is certainly unattainable in the short run and likely out of reach in the long run.

The war with Iran could well be a case where Trump's normal pattern-act, wait to see what happens, react, rinse and repeat-will not work. Having no coherent goal or strategy and only a set of ever-changing tactics is not a recipe for quick success, as we are beginning to see. So, "'round and 'round and 'round it goes. Where it stops, nobody knows." While the global economy slowly grinds to a halt. Abracadabra.

Author's Note: I am retiring from CSIS on March 29, 2026. I plan to continue writing this column and participating in the Trade Guys podcast, so please continue to read and listen. However, my CSIS email address will no longer be working, so if readers or podcast listeners want to contact me directly, they should do so at [email protected].

William A. Reinsch is senior adviser and Scholl Chair emeritus with the Economics Program and Scholl Chair at the Center for Strategic and International Studies in Washington, D.C.

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