Blain’s Morning Porridge August 18^th, 2026 – Trump and the End of the American Era

“Turns out you didn’t need a war to destroy the economy…”

19 months of Donald J Trump have been extraordinary – the unravelling of alliances, the forever war with Iran, and the belated discovery that financial clout doesn’t translate into geopolitical power. While the Mid-terms may make Trump a lame-duck, the consequences of Trump will hamstring the USA for decades and colour a new economic reality.

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Key Takeaways

• Markets are making a mistake if they think Trump is just a temporary noise and aberration. The consequences of the Trump era could take decades to correct and will be very significant on the dollar order of markets.
• Trump has squandered American’s real global strength – its alliances. From the Gulf, The China Seas, to Europe, nations are now uncertain of America’s reliability and credibility.
• Half of America’s ambassadorial posts are vacant. Many others have been filled with presidential cronies.
• Financial supremacy is not the same as industrial supremacy – dollars can’t be turned into skilled labour, new ships, planes, tanks or missiles overnight.
• China has time on its side. Its’ proxies: Iran, Russia and North Korea, can force America to consume war stocks at rates it can’t replace. China wins if America is exhausted before it has to do anything.

Yesterday was an interesting one for Trump watchers. The American President pulled the USA out of planned military exercises with South Korea – citing his great relationship with Kim the Plump of North Korea. Then he threatened to bomb Oman if it gets in the way of his deal with Iran. What deal?

Is anyone still paying any attention to the antics in Washington anymore?

The last 18 months of US diplomacy and politics has been…exhausting. Most of the market has given up trying to follow the up and downs, reversals, and multiple TACOs of the Trump era. A market consensus has formed that Trump is what he is… an aberration that makes lots of noise, creates lots of shocks and instability, but ignore it because he will soon be irrelevant. The market now discounts him, watches Treasuries, wonders where the money for AI will come from, and hopes rates will fall…

It would be a terrible mistake to assume the world will just revert to normal once the Trump era is over. The consequences of the Trump administration will be significant and long-term. The manner in which Trump has mishandled the power of the USA demonstrates some fundamental truths – that despite being an economic superpower, America is now struggling to turn economic power into real power, revealing a gaping gap in defence and power projection. That’s an investment theme no one should miss.

Factor that into your 10-year US Treasury outlook…

The global trust and faith in the USA that has taken Trump 19 months to unravel took the USA 250 years to construct as it rose from an insurrectionist colony to become today’s global economic superpower. That position is under threat from the next hegemonic power – China. Another question for markets is how significantly the consequences of Trump accelerate the end of the current dollar order of global markets as China seeks to replace the USA.

There is little point asking the question what Trump seeks to achieve. I doubt even he knows – and the MAGA Republicans are too fearful of him to ask. The results of his furious pace of deal-making are increasingly clear; global faith in the reliability and credibility of the USA has been knocked – and that is having consequences on how the US is perceived across global markets.

The image of the USA has altered dramatically. It is no longer perceived as the bastion of law & order free-market capitalism. With the US government debt set to breach $40 trillion dollars in the next few days, there is sense of a loss of control across finance. There is a whiff of corruption and self-interest perceived around the administration that makes the Nation increasingly look like a third-world power.

Critical to America’s success have been its global relationships, its role as the Arsenal of Democracy, the economic success democratic capitalism, the aligned economic growth of its allies, and thus the dollar’s exorbitant privilege in global trade. Yet the dominant theme of the last 19 months has been the unravelling of both soft and strategic power relationships – all in the name of “making a deal.”

Trump never understood that America’s success is its relationships. Trump has left nearly half, (97), of America’s “strategically important” capitals without a Senate-confirmed ambassador. Of the posts he has filled, only 17% are with career Foreign Service professionals – the rest are his own “political” appointments giving his cronies big houses in foreign places. Despite the current ructions across the Middle East, Trump has left the Ambassadorial posts in Saudi, the UAE, Qatar, Egypt, Kuwait, Iraq and Pakistan unfilled – essentially running these relationships direct from Washington. Across the World, the nations blessed with an American Ambassador know he’s probably a chum of Donald. That will give them great peace of mind.

Too late America is waking up… The USA may be the world’s strongest economy, but alongside its rise to wealth and a financialised economy has been the disestablishment of its industrial infrastructure – not just in terms of factories, yards, and armouries, but the trained staff to work them. The USA can no longer build the ships, the planes, the munitions at the speeds at which modern warfare will demand.

Yesterday the US Navy signed a new 7-year $23 billion contract with Raytheon raising production from 60 Tomahawk missiles to 1000 per annum. US Secretary of War, Pete Hegseth, has repeatedly assured Pentagon watchers there is no shortage of critical munitions required to fight. It’s reckoned the stocks of defensive missiles like THAADs, and Patriots have been massively depleted by the Iran war. The fear is the USA no longer has the capacity to defend strategic resources like Taiwan.

Hegseth might persuade GOP yes-men in the Capitol that everything is fine, but he won’t be fooling the Chinese.

Over the past few days, the US papers have been full of concern for the sailors onboard the USS Abraham Lincoln, one of the USA’s 11 nuclear carriers, which hasn’t touched shore since November 2025. US carriers are the single most powerful military assets in history. A single CVN can take out most nations. Yet, although there are notionally 11 only a few are in service at any time.

Earlier this year the USS Gerald Ford returned to the states after an 11-month deployment in the Gulf and Venezuela. (It will be a year before she’s ready for another operational tour!) The carriers have sustained the pace of operations against Iran, relying on the US navy’s unparalleled logistical ability to supply the fleet at sea. The Lincoln will shortly be relieved by the USS George Washington – which will hold the line till early 2027 when the USS Theodore Roosevelt might be ready.

Strains are showing. Moving the Washington to the Gulf leaves the US Pacific Fleet without a carrier to deter China in the seas off Taiwan. The operational pace is costly on hulls, airframes and particularly crew. The damage becomes cumulative – the returning carriers need longer to service, airframes need to be rebuilt, but the number of crew choosing to remain in the service is diminished. While ships, planes and missiles can be rebuilt, it takes 20 years plus to train the top petty officers and officers who actually run the warships.

The cost on smaller ships is even higher. The workhorse of the US Navy are its Arleigh Burke destroyers – they do everything from cruise missile attacks, air defence, anti-submarine warfare, ballistic missile protection and guard the carriers. Last month, the 29-year-old USS Benfold, an Arleigh Burke escorting the Washington, broke down in the South China Seas. It had to be towed for 4 days into the Philippines. It was the second destroyer to suffer power loss this year. Together they highlight how stretched the US Navy is.

It’s the US Navy that’s bearing the brunt of Trump’s Iran war, but the consequences will be felt across the whole US military, its logistical chain, and therefore the nation’s ability to maintain its superpower status. Meanwhile, the Emperor Xi in Beijing is clever enough to know not to “interrupt the enemy while he is making a mistake.”

The bigger issue for the USA is reversing the Trump effect and consequences. By weakening the USA’s relationships and alliances, Trump has diminished its influence and power. That opens the door to former aligned nations to deal elsewhere – with China which now produces goods as good as anywhere, including AI. That reduces the demand for US goods and therefore moves the global economy away from its long-established dollar base, the end of dollar privilege (which was invested in US bonds!). That means a potential funding problem for Treasuries and a tumble in the dollar. It won’t happen overnight… but happen it might.

Out of time and back to the day job…

Bill Blain

Author of the Morning Porridge
CEO Windshift Capital
Advisor – Spitfire Strategic Capital

Meanwhile, don’t forget about my new book: The Battle for Hamble

You can read a review on the Society of Professional Economist’s website here.