Data points in the global economy. It’s now been 121 months since the U.S. economy last entered recession in 2009, according to the National Bureau of Economic Research, making the current expansion officially the longest on record (or at least of the 34 expansions tracked since 1854). The reigning champ had been the golden decade from March 1991 to March 2001, before the tech bubble burst. We’ve been arguing that the U.S. economy is at the peak of the business cycle and due for a slowdown for at least two years now. This underscores one of the core challenges of geopolitical forecasting: The shorter the timeline, the more forecasts hinge on inherently fickle variables such as political and market forces, as well as the individual interests and choices of policymakers.
Still, all economic cycles that go up must come down. And there’s been a steady drip of data showing emerging weakness in both the U.S. and global economies. The latest: JPMorgan/IHS Markit’s global manufacturing index, which measures factory activity and sentiment, fell for the second consecutive month to its lowest level since June 2012. Similarly, the Institute for Supply Management’s gauge of U.S. manufacturing activity showed the slowest growth since October 2016. In China, meanwhile, the Caixin/IHS Markit Purchasing Managers’ Index posted a contraction for the first time in three months. PMIs across Europe likewise posted sharp contractions. The Bank for International Settlements is urging central banks to stop chasing higher growth and preserve ammo for the darker days to come.
Iran escalating to de-escalate? A day after Tehran breached limits on its stockpile of low-enriched uranium agreed to under the 2015 Joint Comprehensive Plan of Action, Iranian Foreign Minister Mohammed Javad Zarif said the next step would be to begin enriching uranium above 3.67 percent fissile purity. He also pointed out that the breach is not, in fact, a JCPOA violation, since the limits were effectively suspended when the U.S. violated the deal by imposing sanctions on Iran – and that Tehran will reverse course once Germany, France and the U.K. “abide by their obligations.” By ramping up enrichment, Tehran is trying to urge Europe to act on its behalf against U.S. sanctions pressure. By offering a legal rationale for doing so, Tehran is trying to dissuade European signatories from triggering a process that could result in all pre-deal U.N. sanctions “snapping back” into place, only deepening Tehran’s economic and political woes. But even if Tehran can dodge snapback sanctions – and, by the letter of the agreement, Zarif may have a case – increasing enrichment won’t win many friends in Europe. Europe wants the deal to survive, but it won’t spend much diplomatic or political capital to save it, nor will it push European firms to do business with Tehran and risk getting slapped with U.S. secondary sanctions. Tehran presumably has little real hope of Europe coming to its rescue. So, it’s perhaps better to view these moves as focused mainly on expanding the negotiating pie in preparation for potential talks with the U.S. Indeed, it’s notable that former Islamic Revolutionary Guard Corps commander Hossein Alaei called last week for Tehran to negotiate with the U.S. – reportedly the first such call by a high-profile figure from the group. Domestic resistance from hard-line groups was always going to be one of the biggest hurdles to negotiations, so it’s worth watching for any signs of IRGC recognition that Tehran has few alternatives, none of them good.
The U.S. is still in Afghanistan. U.S. President Donald Trump on Monday made the case that the U.S. was not yet ready to further scale back its presence in Afghanistan, calling the country “the Harvard of Terrorism.” If the U.S. military does withdraw, the president said, it would be forced to leave a strong intelligence apparatus in place. This came as the U.S. and the Taliban are holding their seventh round of negotiations in Qatar. It also came the same day as a major Taliban attack in Kabul killed at least 40 people and injured around 100 more – just the latest in a seasonal surge in violence. That Washington and the Taliban are even openly talking is a positive sign for hopes that the U.S. will leave Afghanistan before the war stretches into a third decade. Engaging the Taliban directly was once considered too politically toxic for the U.S. to stomach, meaning its only option was a long-odds strategy of total pacification. But Monday’s attacks underscore just how difficult it will be for the U.S. to cultivate any sort of stable internal balance of power in the country before leaving. Eventually, the U.S. will just need to find ways to stomach the political risks of bringing the troops home without a total victory.
Speaking of old enemies… The U.S. conducted a strike Monday in Idlib province on what it said was a training camp for leaders of al-Qaida in Syria. The U.S. rarely conducts strikes west of the Euphrates River, which is the de facto dividing line between deployments of U.S. forces to the east and Russian and Syrian forces to the west. It’s not entirely clear what motivated the U.S. to strike west of the river, but it’s likely related to the collapsing agreement between Turkey and Russia on enforcing a safe zone in the area. The Syrian army’s attacks on rebel groups – and attacks directly on Turkish forces deployed to observation posts in Idlib – have intensified, and Russia has proved either unwilling or incapable of stopping them. Al-Qaida in Syria is the sort of group Turkey has proved unable to control, giving Syria added impetus for the attacks. So, the U.S. may be stepping in on Turkey’s behalf (perhaps in exchange for Turkish concessions on other issues) to restore some balance of power.
- Iraqi Prime Minister Adel Abdul-Mahdi issued a decree curbing the powers of mostly Iranian-backed militias.
- Mexican President Andres Manuel Lopez Obrador proposed disbanding the Mexican army in favor of the country’s new National Guard militarized police force – a proposal he admitted faced long odds.
- The U.S. is considering additional tariffs on goods from the European Union in response to EU aircraft subsidies.
- New Panamanian President Laurentino Cortizo was sworn into office.
- Italian and Slovenian police started joint patrols within 10 kilometers (6 miles) of their border to stem the flow of migrants.
- China’s state-controlled Global Times called for “zero tolerance” for protesters in Hong Kong who ransacked the city’s legislature on Monday.
- A drone attack on Abha Airport in Saudi Arabia by Yemen’s Houthi rebels early Tuesday left nine people injured.
- Sudan’s main opposition coalition announced plans to step up protests in mid-July.
- The Indian government issued a request for bids on the construction on six new warships and several smaller vessels.
- Russia canceled several flights to the Czech Republic after Russian authorities and Czech Airlines were unable to reach an agreement on the airline’s Prague-Seoul route.