Trump’s Global Tariffs Struck Down by US Supreme Court

Summary

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Bloomberg Businessweek – Podcast Summary

Episode Title: Trump’s Global Tariffs Struck Down by US Supreme Court
Date: February 20, 2026
Hosts: Carol Massar, Tim Stenovec
Featured Reporters/Analysts: Greg Storr (Bloomberg Supreme Court Reporter), Kate Sullivan (Bloomberg White House Correspondent), Olusinola (Head of US Economic Research, Fitch Ratings), Alan Ayer (Middle East Institute)

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Overview

This episode centers on the US Supreme Court’s landmark decision to overturn the pillar of President Trump’s global tariffs in his second term, removing much of the executive’s ability to impose wide-ranging tariffs without explicit congressional authorization. The ruling’s political, legal, and economic ramifications are explored in detail, including Trump’s anticipated moves to reinstate tariffs using alternative authorities, and the potential for escalating military tensions with Iran.

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Key Discussion Points

1. Supreme Court Decision: The Pillar of Tariffs Overturned

• [01:47 – 06:43]
  • The Supreme Court ruled that the statute President Trump used for key tariffs does not give the president unilateral tariff authority during economic emergencies.
  • Over half the tariffs imposed since his return to office are struck down.
    • Greg Storr:

      “The Supreme Court said that statute … does not include the tariff power.” [02:10]

  • The decision was 6–3 and emphasized congressional, not executive, authority over tariffs.
  • Dissenting justices believed some tariff power rested with the president, but the majority disagreed.
  • Trump plans to invoke other, more limited and cumbersome tariff authorities.

2. Legal Fallout and the Question of Refunds

• [03:01 – 03:47]
  • The administration anticipates years of litigation over $170 billion in collected tariffs.
  • The Supreme Court did not rule on refund obligations—expected to become a significant legal battleground.
    • Greg Storr:

      “There will be big fights over refunds … It’s not yet clear what argument the administration has against refunds.” [03:03]

3. Presidential Power and the Role of Congress

• [04:30 – 05:56]
  • The ruling narrows executive latitude, reaffirming that Congress retains taxing and tariff authorities unless handed over “clearly.”
    • Greg Storr:

      “Unless Congress has clearly handed over that power to the president, we’re not just going to assume that the president can do something. There are actual limits to what he can do.” [04:57]

  • The Supreme Court evoked prior decisions limiting President Biden, signaling a broader rebuke of unchecked executive action.

4. White House and Trump’s Response

• [10:34 – 13:09]
  • Trump appeared “defiant” and repeatedly emphasized the administration’s newfound “certainty.”
    • Kate Sullivan:

      “We saw a very defiant Trump at the podium … He talked a lot about certainty … now, at least they … have some certainty, and they think that that should inspire some confidence.” [10:34]

  • Trump vows to use Section 122 and Section 301 for new tariffs, including a 10% across-the-board tariff, but specifics remain vague.
    • Kate Sullivan:

      “The president kept saying, I can do whatever I want. So we don’t have those specifics yet.” [12:13]

  • Questions persist about how trade deals—especially with India—will be affected; some may require renegotiation.

5. Economic Impact and Outlook

• [14:40 – 22:29]
  • Olusinola (Fitch Ratings) sees renewed uncertainty for US businesses and the global economy, especially given the ambiguous scope and duration of new tariffs.
    • Olusinola:

      “The uncertainty that it brings to the table, you can’t run away from it. … Tariff risks were receding. It’s come right back.” [15:35]

  • 10% global tariff may be temporary (150 days) and is likely to include exemptions for sectors like pharmaceuticals and energy.
  • Ongoing uncertainty could chill corporate investment decisions; a blanket tariff is more disruptive.
  • Possible auto tariffs (threatened at 15–30%) could further impact markets, but initial reactions among US automakers were muted.
  • Inflation risk: The economy faces persistent inflation pressures, and renewed tariff activity could “definitely” make it worse.
    • Olusinola:

      “With this renewed uncertainty, [inflation] potentially could get worse. … Inflation is stuck at 3%. … If you compare where we are today with headline of a year ago, it’s actually accelerated.” [18:46]

  • The Federal Reserve is expected to remain vigilant and possibly consider rate hikes if inflation does not abate.
  • GDP growth looks resilient but slowed by shutdown effects; recovery anticipated in subsequent quarters.

6. Political Ramifications Ahead of Midterms

• [20:44 – 21:50]
  • Trump’s economic strategy is expected to be shaped by midterm calculus; a strong economy remains a top White House priority.
    • Olusinola:

      “Corporations are used to the tariff noise to some degree. So hopefully there will not be a knee jerk reaction from a price standpoint going forward.” [21:28]

7. The Middle East: US-Iran Tensions Escalate

• [24:51 – 31:54]
  • Trump signaled consideration of a “limited military strike” on Iran to pressure its nuclear program.
  • Alan Ayer (Middle East Institute) believes hostilities are highly probable within weeks, with both the US and Iran preparing for conflict.
    • Alan Ayer:

      “It’s probable we’re heading for war, whether that’s in a couple of days or within 10 days to two weeks … There will be hostilities in the region soon.” [25:47]

  • Iran is assumed to be “reinforcing their facilities … nuclear sites, missile sites,” preparing for missile and drone responses.
    • Alan Ayer:

      “Iran sees itself as under existential threat … if it’s attacked, it will respond aggressively.” [26:24]

  • Domestic turmoil in Iran may actually incentivize leaders to resist US demands, viewing an attack as an opportunity to rally national support.

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Notable Quotes & Memorable Moments

• Greg Storr [02:06]:
  “The main pillar of the tariffs … does not give him tariff authority. The Supreme Court said it knocked out more than half of the tariffs that Donald Trump has imposed since … returning to office.”
• Kate Sullivan [10:34]:
  “We saw a very defiant Trump at the podium … He talked a lot about certainty.”
• Olusinola [15:35]:
  “The uncertainty that it brings to the table, you can’t run away from it … Tariff risks were receding. It’s come right back.”
• Alan Ayer [25:47]:
  “It’s probable we’re heading for war, whether that’s in a couple of days or within 10 days to two weeks.”

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Timestamps for Important Segments

• [01:47] – Show starts, Supreme Court ruling coverage with Greg Storr
• [03:01] – Legal aftermath, refunds, and litigation discussion
• [04:30] – Executive branch power, significance of the ruling
• [10:34] – On-the-ground at the White House with Kate Sullivan
• [13:09] – Specific legal authorities left for Trump (Sections 122, 301, 232)
• [14:40] – Economic analysis segment with Olusinola (Fitch Ratings)
• [18:43] – Inflation and Federal Reserve outlook
• [20:44] – Political implications ahead of the midterms
• [24:51] – Escalation with Iran, interview with Alan Ayer (Middle East Institute)
• [25:47] – Likelihood of war and regional analysis

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Flow and Tone

The episode maintains a brisk, analytical tone, blending in-field reporting with real-time economic and geopolitical analysis. Hosts and guests avoid hyperbole, instead relying on legal, economic, and diplomatic expertise for insight. There’s visible concern across contributors about the uncertainty now reintroduced to US trade policy and international security.

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Conclusion

This edition of Bloomberg Businessweek meticulously unpacks the Supreme Court’s seismic decision on Trump’s tariffs, with special focus on lasting policy uncertainty, looming legal battles, economic implications for the markets and inflation, and the specter of conflict with Iran. The episode delivers a comprehensive, real-time analysis invaluable for business leaders, policy watchers, and anyone tracking the evolving landscape of US economic and foreign policy.

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Transcript

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[Carol Massar]

We head to D.C. bloomberg News Supreme Court reporter Greg Storr was listening to President Trump as well. He is in the Bloomberg News Bureau bureau in the nation's capital. Greg It's a big day. We kind of expected the this outcome, but I don't know that we expected the decision today. But exactly what was the decision and the significance of it? Walk us through it.

[Greg Storr]

So the significance is that the main the pillar of the tariffs that the president has been imposing over the last year does not give him tariff authority. The Supreme Court said it knocked out more than half of the tariffs that that Donald Trump has imposed since since returning to office. The Supreme Court said that statute, which gives the president certain powers during economic emergencies, does not include the tariff power. And that was sort of the fundamental dividing point. The dissenting justices said, yes, it does. Now, as the President suggested, there are other tariff authorities he's going to try to invoke those as much as he can, but those do tend to be more cumbersome, more limited. And so we'll see just how much he's able to replace the tariffs that have been struck down.

[Emily]

Where does this go next? Is this ever coming back to the Supreme Court, or are the next steps here really going just back to lower courts?

[Greg Storr]

It's really going to be the lower courts. There will be big fights over refunds. In that press conference, the president said he expects that to be litigated over a matter of years. It's not yet clear what argument the administration has against refunds for the $170 billion that have been paid in these tariffs under this law. But it sounds like they are prepared to at least make some of them. So that will be a big fight. And then we may well have future fights over these other laws, including the one that the president said he is going to use to impose that 10% global tariff. That's a more limited authority that is supposed to extend only for 150 days. There may be questions about the exact parameters of what Donald Trump can do under that law.

[Carol Massar]

I am curious, too, Greg, about what the president said about foreign influence of the Supreme Court. And he said, in my opinion, the court has been swayed. What is your read on that and what is he maybe insinuating?

[Greg Storr]

It's a bit of a head scratcher. You know, the president, of course, has always said that these tariffs are paid by foreign countries, not by US Importers. Well, US Importers have made very clear in suing over these things that they're the ones who are paying for them. And so that is perhaps what he's alluding to there, you know, certainly no evidence of that that I've seen in the opinion that it was anything other than their interpretation of what the law and the Constitution require.

[Emily]

I'm wondering, you know, this decision, the 6 to 3 decision, what kind of clarity does it give us about just how much power the executive branch has? Because, of course, right after the decision, we have Trump coming out and saying, you know, floating another 10% global tariff.

[Greg Storr]

Yeah, well, so kind of two halves to the answer. One half is the president is right. He has other authorities. And the Supreme Court didn't say you couldn't put in place any tariffs at all. You just can't do it using this law that the president has used so far up until now to basically impose tariffs for any reason at all that he wants. So in that sense, it's narrow. But the court Also in a section that was joined by two Trump appointees, Neil Gorsuch and Amy Coney Barrett, and also the chief justice, John Roberts, you know, talked about Congress's tariff authority, Congress's taxing authority, and said that unless a stat, unless Congress has clearly handed over that power to the president, we're not just going to assume that the president can do something. There are actual limits to what he can do in the court, invoke some of the opinions it used to roll back to trim to knock out some of Joe Biden's initiatives. So the court, at least, you know, three Republican appointed members of the court, as well as the liberals were trying to send the message that, hey, we are putting some real limits on what this president, like all presidents, can do. Yeah.

[Carol Massar]

And I love that question from Emily and what you just said, Greg, because I do think about, you know, what the president, you know, we've talked so much about the expansion of the executive branch and of presidential powers in the second term of a Trump White House. And it does seem like this president, many would say, can do just about anything. Right. We've seen a Congress that's very quiet, a Republican led Congress. But having said that, how do you read the tea leaves on a Supreme Court that has been seen to be very sympathetic and maybe even political, some would say to political President Trump specifically and his policies to make this ruling, or did they not really have any choice based on it was pretty black and white in terms of the law.

[Greg Storr]

Well, certainly important to emphasize, as you alluded to, that over the past year, the Supreme Court has let Donald Trump do an awful lot of things that he wanted to do, most of them only on a temporary basis, letting him fire people, letting him not spend money, letting him end immigration programs. And, you know, that's still a reality that the Trump that the court is is being pretty deferential to Donald Trump in a lot of areas. But these were totally different legal questions. As I said, the Constitution says the tariff power is Congress. And the court was looking at this case as a separation of powers case, unlike the other ones that it had been dealing with. And this is a, a place where from the court's perspective, Donald Trump just went too far.

[Carol Massar]

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[Carol Massar]

We're going to stay with this story and we touched on some of this certainly from the press conference with the President there at the White House, but also with Greg and we want to get into maybe a little bit more of what we are hearing from that press conference after that press conference what's going on inside the White House. And for that we want to get to Bloomberg News White House correspondent Kate Sullivan who just ran to the microphone there on the north lawn of the White House. Kate, good to have you. You were in the room. Tell us a little bit about what that felt like on what is certainly got to be, I think safe to say the President's got to be feeling a big defeat with what is a major policy of his second term here in the White House.

[Kate Sullivan]

Absolutely. So we just wrapped that press conference, and we saw a very defiant Trump at the podium. You know, there's a lot to unpack from that press conference, but some of the top lines are the president said that he would be signing new orders to impose tariffs to replace some of these tariffs. He talked about using section 122 to impose a 10% across the board tariff. Also talked about section 301, which applies to unfair trade practices. I asked the President about whether this meant that he would now be asking Congress to take additional action when it comes to tariffs and if he'd spoken to Leader Thune about this. But it was really interesting. He said, I don't need to. I'm not going to do that because I don't need to. I felt like the top line from the President was, we're still going to have tariffs, but they're just going to look a bit different. And I thought it was interesting. He talked a lot about certainty. He kept repeating the word certain certainty, saying that for a very long time we were waiting to see how this decision was going to play out, what was going to happen. And we were living in sort of a limbo period. The White House was. And now, at least they. They know what has happened. They have some certainty, and they think that that should inspire some confidence and really sort of now dictates how they're going to move forward with this when

[Emily]

Trump does move forward. There's a great piece on the Bloomberg terminal right now, the Quicktake, about just all of Trump's legal options that he has after the Supreme Court said his tariffs are illegal. What will those look like in practice? Are the tariffs that Trump would potentially introduce under, you know, these new laws going to be as expansive of as what we had seen last year post Liberation Day?

[Kate Sullivan]

There were several reporters in the room who were trying to press for more specifics on what exactly this would look like, what exactly the rates would be. The president kept saying, I can do whatever I want. So we don't have those specifics yet. We are, you know, obviously this has just happened. The White House is still responding to this. We heard a lot of broad top lines from the president today about how he's feeling about it, what he's going to do, but there are still a lot of questions. And he was asked, for example, about the refunds, whether the, the administration now needs to refund all the, the billions of dollars in revenue that they've collected from the tariffs. And he said the court didn't, didn't weigh in on that. He sounded frustrated that they did not weigh in on that particular part. And so we still don't know. He said that that would be playing out in courts. And like a lot of this, I think this, this is still going, there's still a lot of unresolved questions, and this is still going to be playing out for quite some time.

[Carol Massar]

You know, Kate, looking at section 301 and 232, 232 is national security reasons for maybe imposing tariffs. 301 seems to give the section 301 seems to give the president a lot of leeway to impose tariffs. I mean, it sounds like he still has a lot of levers that he can pull if he deems that it's important for the United States, national security or otherwise.

[Kate Sullivan]

Absolutely. I think national security has been all

[Carol Massar]

within the laws, I guess what I would say. All within the law.

[Kate Sullivan]

All within the law.

[Emily]

Yes.

[Kate Sullivan]

The, the, the president has been talking about how tariffs are critical to national security. That's been a key part of his argument. I think we still have to see, you know, how this is going to play out, what he's going to do next. But definitely, you know, I think another part of this is, is how is this going to affect the trade deals that have already been struck. He talked about that briefly in the press briefing room today, saying that some of them are going to have to be reopened, so some of them are going to have to be renegotiated, but that a lot of them can still stand. He was asked specifically about India. He said India is the same, that will stay the same. But I think there are still a lot of questions about how exactly he's going to use, you know, when it comes to these particular sections that he, that he laid out, how that's going to be implemented in practice.

[Tim Stankiewicz]

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[Carol Massar]

So we want to see what our next guest has to say about all of this. Olusinola is head of US Economic Research at Fitch Ratings. He's responsible for coverage of US Economics, and that includes the labor market, consumer spending, inflation, demographics, and so much more. He joins us here in studio. Olu, great to have you here with Emily and myself. We're what matters the most to you as someone who keeps A watch on the US Economy. Is it that Supreme Court ruling and pushback on President Trump's tariffs, who he has said he's going to find other ways to do this, or is it all the economic growth, kind of the mixed messaging, maybe to some extent on inflation a little bit hotter than we thought and growth a little bit weaker.

[Olusinola]

Yeah, thanks. Thanks, Carol, for having me. It's good to be back. I think if you, if you had asked me this question at 10:00am Obviously I would have said, yeah, it's GDP, the GDP print, the inflation print, particularly the inflation print. Just because it was quite hot.

[Alan Ayer]

Yeah.

[Olusinola]

But, you know, fast forward the last couple of hours. Clearly the Supreme Court decision is very, very important. The uncertainty that it brings to the table, you can't run away from it in as much as we thought tariff risks, tariff related risks were receding. It's come right back. So, yes, the president has imposed the 10% blanket. I still have to figure out if that 10% is truly a blanket.

[Carol Massar]

Right.

[Olusinola]

Or are we going to exempt pharmaceuticals, are we going to exempt oil and gas, which sounds to me like what they will do, but we don't, I don't know at the moment. I don't think it's clear. So when we see that executive, that executive order, we will find out.

[Emily]

You have in your notes that, that you're calling today Liberation Day 2.0. Of course, we had Liberation Day last year. It was big market moving day as well. You link this, though, to optimism. Are you still optimistic that this is going to be good for the U.S. economy, particularly in light of Trump floating 10%.

[Olusinola]

I do think that compared to, I would call this Echoes of Liberation Day. Right. Not quite seismic as Liberation Date was. The markets are not down what 10%

[Carol Massar]

of conversation which we've been talking about feels kind of telling.

[Olusinola]

Yes. Yeah. But I do think that to the extent that we have the 10%, if the administration follows through with all of the exemptions, it's going to be fine because effectively it will be lower than what we had before. If it's a blanket, that means collections will be slightly higher. So that is, I don't think most companies have planned for that in terms of all of a sudden they have to pay more in tariffs. I think that would bring some level of uncertainty. The other point is it's just for 150 days. What are they going to replace it with? It's most likely going to be more sector focused. So sector focus by nature would affect some countries a lot more than others. So that brings A lot more uncertainty. It's probably going to affect price and decisions, capex decisions and the likes. I don't think that's what the economy needs at the moment because this is an economy where if the government gets out of the way, the tailwinds are actually quite strong. So you have to now think this may be a little bit negative because the economy on its own was relatively resilient.

[Carol Massar]

Yeah, I want to go into that. I also just want to mention that the President did threaten 15 to 30% auto tariffs. Now I'm looking at 40. Ford is up about 1.2% and I think GM is little change. So it's not like it's actually up about 1/3 of 1%. Yeah, those hit those tailwinds, if you will. Whether it's higher tax refunds we get because of tax cuts, corporate tax cuts that could lead to spending. I mean there's a lot of stuff that could be very stimulative. So that brings us to that hotter inflation print which you and your notes kind of say. It's, it's a reality check. Like we have to kind of own up that as we've heard from the Fed or Jay Powell.

[Alan Ayer]

Right.

[Carol Massar]

Inflationary pressures are still a thing.

[Olusinola]

They are still.

[Carol Massar]

I could even maybe get worse and

[Olusinola]

definitely could get worse. I think now with this renewed uncertainty, potentially could get worse. I think there's this wedge between CPI and PC at the moment. The CPI print we got a few weeks ago, right. It was what, two, two and a half percent, 2.4%. Lots of people jumping up and down saying, hey, clearly disinflationary. But with this reality check, inflation is stuck at 3%. That's essentially what it is. And if you compare where we are today with headline of a year ago, it's actually accelerated.

[Carol Massar]

Well, what's really kind of wild. And Mike McKee who is breaking down the Fed minutes on Wednesday says, you know, they're going through, going through. And then you get to like I think the last paragraph where it said Fed officials were wary of cutting interest rates at their January meeting, but several suggesting the central bank may need to raise rates if inflation remains high. So they are already like continuing to be very vigilant when it comes to higher inflation.

[Olusinola]

You have to be because 3% is not 2%, obviously. Right. And with all of the tariff noise, you still are not clear whether it would accept accelerate or not. So the Fed, given a labor market that seems to be relatively stable now, the balance of risk has shifted. It has, it now has to be Inflation, inflation, inflation.

[Emily]

Does this make the report we got today about growth being slower than we expected? More of a blow to the economic outlook, particularly if we have the Fed raising rates.

[Carol Massar]

Good question.

[Emily]

Where growth is slowing.

[Olusinola]

I do think that if you dig deeper, once you go under the hood, you realize that about 100 basis point or so, 1 percentage point was because of a shutdown. If you add that back, you're talking about 2 1/2% growth. The economy on its own is resilient. I don't think you can take that away. And you're also going to get some payback during this quarter. Right. When we get the gdp. So potentially growth could be slightly higher.

[Carol Massar]

All right, you're not a political analyst, but I've got to throw midterms into this because I have to think as the president starts to, you know, go to different states, we've started to see some of that. He is thinking a lot about midterms and whether or not Republicans lose a lot of seats in Congress and which would be really a vote on his White House. So having said that, do you think that will shape what he does with tariffs and policies? Because he wants an economy. Right. Any president wants an economy humming along, whether it's midterms or obviously a presidential race.

[Olusinola]

I think that would be the rational view. And without me going further, without me going further, anything can happen between now and the midterms.

[Alan Ayer]

Right.

[Olusinola]

There will be that affordability push. We're starting to see that. Hopefully if that is really, really strong, that may overwhelm the tariff noise. Right. And to some degree, corporations are used to the tariff noise to some degree. So hopefully there will not be a knee jerk reaction from a price standpoint going forward.

[Emily]

How optimistic are you about the refunds for the tariffs? This morning before Trump spoke, the question was, oh, okay, well then how are all of who's going to get the refunds and how smoothly is that process going to go? How are you thinking about that?

[Olusinola]

So I'm going to go from I'm not a political strategist to I'm not a lawyer. But the reality is that corporations have sued. They have the legal basis to ask for a refund. Now prospectively going forward, they may still pay tariffs, but it seems to me that they have the legal basis since it's illegal, hey, give me back my money. It doesn't belong to you. That's my sense.

[Carol Massar]

Stay with us. More from Bloomberg businessweek Daily Coming up after this.

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[Tim Stankiewicz]

That's loseweightnow co. You're listening to the Bloomberg Businessweek Daily podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

[Carol Massar]

We've talked about the Supreme Court decision over tariffs. We've talked about the economic data. A lot of big news coming out investors. We've got to talk though, about Iran because President Trump said he's considering a limited military let's try that again. Considering a limited military strike in Iran, ratcheting a pressure on the regime to come to a quick deal over its nuclear program as he may masses military forces in the region. We just talked with our Tony Capaccio about saying that he doesn't anticipate maybe anything coming this weekend and kind of put in perspective the forces that are there. But let's get an update on this story. And for more, we head to Alan Ayer. He's distinguished diplomatic fellow at Middle East Institute, and he joins us. Alan, it's good to have you here with us. Your view as you listen to what the president has said and what's coming from the White House, and as you watch what's going on in the region

[Alan Ayer]

first. Hi, Carol. Hi, Emily. My view is it's probable we're heading for war, whether that's in a couple of days or within 10 days to 2 weeks. In terms of as the military puts it, the table is pretty much set in terms of US Military assets in the region. And even though this administration hasn't given itself its rationale, it seems to be guided almost by inertial forces. So it seems to me there will be hostilities in the region soon.

[Emily]

And what's the clarity here on how Iran is preparing for a potential strike and a potential war?

[Alan Ayer]

Well, I think Iran has already accepted the fact that it's probable that there will be hostilities. Initially, President Trump seemed to be increasing the military threat in the hopes that Iran would exceed and agree to US Terms, but that didn't happen. Iran sees itself as under existential threat from the US And Israel. So right now, I would assume it's preparing and this is what satellite imagery is also showing, preparing for upcoming hostilities and planning its counterattack. And it's not going to differentiate between what the US Describes as a limited attack and any other type of attack. Iran has messaged that if it's attacked, it will respond aggressively.

[Carol Massar]

Is there, is Iran, is Iran right, that it's under kind of an existential threat at this point?

[Alan Ayer]

Well, I think each side is misperceiving the other. As I said, I think President Trump's administration thinks that the more force it shows, the more likely Iran is willing to capitulate, Whereas Iran, which sees itself as in an existential struggle with the US And Israel, sees any capitulation on its own red lines as merely an invitation to further aggression from the United States. So we're in a very different place in the relationship than we've been for most of the decades I've been following it, where even though neither side prefers military aggression, both sides are prepared for it.

[Emily]

So what are the next 10 to 15 days going to look like? That's the timeline President Trump has given Iran for how they could avoid potential military action. And how optimistic are you that the two countries could avoid military action?

[Alan Ayer]

Well, they certainly could if they wanted to. I mean, if there were. I mean, unfortunately neither side has really pursued vigorous, sustained diplomacy. There's a certain inertial momentum here because there's so much distrust between the two sides that there's a type of sort of strategic path dependency. There's certainly room for a negotiated settlement. President Trump's red line is he doesn't want Iran to have a nuclear weapon. That's certainly doable in terms of verification measures, restrictions on the Iranian nuclear program. But due to the total absence of mutual trust and the, the gathering of military forces in the region, at this point, as I said, it seems overwhelmingly probable that there will be military action. So I'm quite pessimistic that they'll be able to avoid some type of military action. And once that happens, prediction is, is, is impossible. I don't know the target set that Iran will seek to, to move against. Once if the US attacks, it could be US forces in the region, US allies in the region, Israel. And we don't know how extensive initial US strikes will be, whether they'll try to decapitate the regime in hopes of accelerating regime change or something more limited.

[Carol Massar]

Alan, what about what's happening at home in Iran? I mean, we are reporting, notes a professor at John Hopkins University who says, you know, Iran may not have much reason to agree to a deal now, might be counting on the idea that a US attack will rally nationalist support for the regime at a time when it's faced pressure internally from weeks of protests. He went on to say that there's a little the US has offered that Iran could agree to. So I do think about also there's what they're dealing with with the US but also what they're dealing with at home in terms of protests.

[Alan Ayer]

Quite correct. There seem to be at least some in the Trump administration who hope that, that an aggressive attack on the Iranian regime will jumpstart some type of regime change. That world will result in a more pro Western user friendly regime in Iran. I don't see that happening. There's no institutions in place that could replace the power vacuum that would be left behind even if the Iranian institutions were successfully decimated by a US Military strike. And that's a huge if, so what Iranians are preparing to do. There's no generalization I can make. There will be possibly some rally around the flag effect and others hoping that the US Finishes the job it starts and puts in some other type of regime.

[Emily]

Just to wrap up here. Tell us what we need to be watching for just right in the near term here about any signals you're going to be looking for, for any clarity on how Iran is preparing for a potential strike.

[Alan Ayer]

Well, we know how they're preparing. They're trying to reinforce their their facilities that they think are strategically important in terms of nuclear sites, in terms of missile sites. Because what Iran is banking on is the ability to respond using its missile forces, using its drone forces, using its rocket forces, both against land targets and also against targets in the Persian Gulf. Because the Persian Gulf is a very small area, very shallow. There's a lot of US Naval assets there. The Iranians traditionally have used swarm techniques with small Iranian craft. Right. So the next thing to watch for is unfortunately.

[Carol Massar]

Got it.

[Tim Stankiewicz]

Initiate Possibilities this is the Bloomberg businessweek daily podcast, available on Apple, Spotify and anywhere else you get. Your podcasts listen live weekday afternoons from 2 to 5pm Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live live Every weekday on YouTube and always on the Bloomberg terminal.

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