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Eight months after former U.S. President Donald Trump launched an unauthorized military conflict with Iran, new economic analysis has laid bare the steep financial toll the standoff has imposed on American consumers and global energy markets. The conflict, which began in February without formal approval from the U.S. Congress, triggered a cascading series of disruptions that have sent energy costs soaring worldwide: Iran responded to U.S. military strikes by closing the Strait of Hormuz, a critical global shipping chokepoint through which roughly 20% of the world’s daily oil supply passes.

Independent analysis from Moody’s Analytics quantifies the cumulative burden on American families, estimating that the average U.S. household has paid $1,760 in extra expenses since the conflict began. Of that total, more than half — $121 billion nationwide, equal to $930 per household — comes directly from inflated energy costs. The remaining costs break down into two additional categories: $425 per household from higher interest rates driven by inflationary pressure from energy prices, and $405 per household from expanded military spending, which will ultimately be paid by taxpayers either through growing national debt or future tax increases, according to Moody’s chief economist Mark Zandi.

In an interview with CNBC published this week, Zandi emphasized that the numbers underscore the intense financial strain already weighing on U.S. consumers. “Consumers are under a lot of financial pressure,” Zandi told the network.

The outlook for near-term relief remains grim, according to geoeconomics experts, as escalating regional tensions across the Middle East continue to threaten energy infrastructure. Karthik Sankaran, a senior geoeconomics research fellow at the Quincy Institute for Responsible Statecraft, noted that ongoing developments — including Houthi forces capturing a key Red Sea port city and a recent drone strike on a Saudi oil pipeline — have left the global energy system far more vulnerable to shocks than it was at the conflict’s outset.

Sankaran explained that global buffers that normally soften the blow of energy disruptions have already been exhausted. Global seaborne oil storage held in tankers has been largely depleted, the U.S. Strategic Petroleum Reserve has already released roughly 130 million barrels to cool prices, and China, the world’s top oil importer, has ramped up its imports to 7.2 million barrels per day, up from a June low of 6 million barrels, leaving little spare supply to absorb new disruptions.

While American consumers face significant discomfort from elevated prices, the situation is far more severe for low- and middle-income nations across the Global South, Sankaran added. Spikes in diesel prices, in particular, hit these economies disproportionately: diesel powers the trucks, buses, and agricultural equipment that underpin local supply chains, and it is far more critical to daily function in these regions than gasoline, which is largely tied to personal vehicle ownership that remains rare in lower-income countries.

The sustained rise in global fuel prices has already sparked widespread public unrest across six continents, a CNN investigation confirmed this week. Protests over soaring fuel costs have erupted in nations including Syria, Guatemala, France, Portugal, and the Philippines. In Syria, where economic instability has compounded over a decade of civil conflict, demonstrations have been particularly fierce. Sunday protesters blocked the major Hasaka–Deir ez-Zor highway, burning tires and halting oil tanker traffic to voice their anger. Muaz Al Abdullah, a Syria analyst with global conflict monitor Armed Conflict Location and Event Data (ACLED), told CNN that mounting public anger over fuel access, rising prices, plummeting purchasing power, and failing public services has reached a breaking point, with protesters now calling for the dismissal of the country’s energy minister.

In her annual State of the Union address to the European Parliament last Wednesday, European Commission President Ursula von der Leyen sounded an urgent alarm over what she terms “China Shock 2.0”, arguing that rising Chinese high-value exports have already arrived and are threatening the bloc’s core industrial base, an outcome she calls unsustainable for European economies.

The original “China Shock” emerged after China’s 2001 accession to the World Trade Organization, when a flood of low-cost Chinese consumer goods including toys, textiles and basic electronics reshaped global supply chains and eroded Europe’s low-end manufacturing sectors. At the time, European economies adapted by shifting production up the value chain, focusing on higher-value goods and services to maintain competitive advantage. The new iteration of this trade dynamic, however, looks very different: today’s Chinese exports are concentrated in high-value sectors including electric vehicles, industrial machinery, chemicals and power generation equipment, meaning Chinese manufacturing has now closed the competitive gap that let Europe escape the first shock, leaving few untapped higher-value segments for European firms to retreat into.

Compounding this shift is the legacy of U.S. trade policy: tariffs imposed by the Trump administration on Chinese goods have reduced Chinese access to the American market, pushing the bulk of China’s export surplus toward the European Union, the world’s largest remaining open large economy. Von der Leyen emphasized that the EU’s daily trade deficit with China now hits 1 billion euros (US$1.15 billion), a level that has crossed a clear tipping point. “Some say the second China shock is looming, but it’s already here,” she said. “It shows in our communities and in factories across our Union. It leads to deindustrialization in the industrial heartlands of Europe. This is unsustainable.” She added that Brussels would deploy every policy tool at its disposal to rebalance the bilateral trade relationship, noting that “Words are good. But deeds are better.”

Von der Leyen also highlighted another key point of economic vulnerability: the bloc’s heavy reliance on Chinese critical raw materials, with China supplying more than 80% of the EU’s needs for many key inputs, and 90% of some rare earth minerals critical for clean energy and defense technology. To address this dependence, she announced the creation of a new European Critical Raw Materials Corporation to help the bloc build stockpiles of materials needed for electric vehicles, semiconductors, batteries and defense systems.

Just days before von der Leyen’s address, on September 9, the European Commission proposed an updated Public Procurement Act that would grant public authorities the power to reject bids for major infrastructure and service contracts if less than 50% of the contract’s total value originates within the EU. The proposed rules, which would govern the EU’s 2.5 trillion euro annual public procurement market covering national agencies, schools and hospitals, still require formal approval from the European Parliament and all EU member states to take effect. Industry groups including the International Road Transport Union and European Metropolitan Transport Authorities have already called for targeted adjustments to the draft rules, asking for grace periods for already purchased electric buses, aligned exemption frameworks and protections for operators from unexpected costs caused by manufacturer delivery delays.

In response to von der Leyen’s remarks, China’s Ministry of Commerce reaffirmed Beijing’s consistent stance on Thursday, emphasizing that China rejects confrontational “microphone diplomacy” and has no interest in escalating rhetorical disputes. Ministry spokesperson He Yadong said Beijing favors open communication and pragmatic problem-solving to address bilateral trade frictions.

The same day, EU Trade Commissioner Maroš Šefčovič held a virtual call with Chinese Commerce Minister Wang Wentao to discuss reciprocal market access and ongoing Chinese export controls on rare earth minerals. Šefčovič is scheduled to travel to Beijing on October 8 and 9 to co-chair the second session of the EU-China Trade and Investment Council, with the European Commission stating it hopes the visit will deliver tangible, credible progress on outstanding trade issues. EU member states will also debate the growing trade imbalance at the upcoming European Council summit scheduled for October 15-16, with the timeline made urgent by shifting U.S.-China trade dynamics: the one-year U.S.-China trade truce is set to expire on November 10, just one week after the U.S. November 3 midterm elections that could reshape Washington’s trade approach. U.S. President Donald Trump and Chinese President Xi Jinping are also set to meet in Washington on September 24, with prior media reports indicating Washington may announce an additional 7.5% tariff on Chinese goods tied to industrial overcapacity ahead of the summit, pushing the average U.S. duty on Chinese imports to roughly 20%.

Recent data underscores the scale of the EU’s growing trade imbalance with China. Eurostat reported in April that the EU’s full-year 2025 trade deficit with China widened to a record 359.8 billion euros, with EU exports to China falling 6.5% to 199.6 billion euros while Chinese imports to the EU rose 6.4% to 559.4 billion euros. The growing deficit has already split EU member states to some degree: in late May, a France-led coalition of five countries including Italy, Spain, the Netherlands and Lithuania called on Brussels to expand the use of anti-dumping and anti-subsidy investigations against Chinese imports in steel, automotive and clean technology sectors. Since that call, Brussels has moved toward drafting collective policy responses to the perceived trade challenge.

Beijing has pushed back hard against the “China Shock 2.0” framing, with Chinese officials arguing that growing Chinese industrial competitiveness should be recognized as a global opportunity rather than a threat. In a late July media briefing, Chinese Vice Minister of Commerce Yan Dong argued that the dynamic should be renamed “China Opportunity 2.0”, outlining four core arguments for this re-framing. First, China’s robust manufacturing base acts as a global anchor for supply chains, offsetting product shortages caused by rising protectionism and geopolitical conflict; between 2012 and 2024, China’s textile machinery exports topped $30 billion, helping Southeast and South Asian nations develop into major global manufacturing hubs. Second, China accelerates global technological innovation by rapidly scaling new technologies into affordable mass-market products, with its open-source AI models recording more than 10 billion downloads globally, expanding access to cutting-edge technology for developing nations. Third, China’s booming green manufacturing sector has driven dramatic global cost reductions for clean energy: data from the International Renewable Energy Agency shows that Chinese production has cut global costs for wind and solar power by between 60% and 80% over the past decade, with China’s green industry projected to exceed 20 trillion yuan (US$2.98 trillion) in size by 2030. Finally, China’s high-volume, low-cost industrial output has helped reduce living costs and curb global inflation, a benefit visible this summer in the strong sales of affordable Chinese-made air conditioners across Europe amid record heatwaves.

Chinese analysts note that Beijing holds a range of policy leverage if the EU moves forward with new restrictive trade measures, including potential adjustments to rare earth export policy, tariffs on European agricultural goods, luxury products and high-end industrial equipment, and restrictions on European service providers operating in the Chinese market. Many Chinese observers argue that full decoupling from China is simply not feasible for the EU. As a columnist for Chinese state-affiliated outlet Huanqiu.com put it, “Europe needs the Chinese market to absorb its high-end equipment, luxury goods and professional services, and needs a stable supply of critical raw materials, while China needs Europe’s technical standards, brand channels and regulatory experience.” The columnist added that framing China as a political scapegoat for Europe’s industrial challenges would only raise costs for European businesses and consumers, and that EU leaders should instead prioritize pragmatic engagement through existing bilateral communication channels.

Other Chinese analysts point out that the EU does not have fully unified trade interests when it comes to China: Southern European states like France and Italy favor stronger industrial protectionist measures to shield domestic manufacturers, while Northern European countries including Germany, which maintain deep economic ties with China, fear retaliation against their own firms that rely on access to the large Chinese market. As Guizhou-based analyst Sima noted, China is both a competitor and a critical export market for the bloc, meaning internal divisions will shape any unified EU policy. If the EU proceeds with new tariffs or market access restrictions, Sima noted, China has a range of potential response tools including trade remedies, export controls, an unreliable entity list, counter-sanctions and adjusted government procurement rules, and any retaliation would hit individual EU member states unevenly, exacerbating internal divisions. Sima added that Beijing will not sacrifice its core development rights in upcoming negotiations, and called on the EU to improve the competitiveness of its own domestic products and relax its own high-tech export restrictions to China as a more productive path to narrowing the bilateral trade deficit.

The Bank of Japan (BOJ) has delivered its latest interest rate hike, pushing its main borrowing cost to 1.25% — the highest level recorded since 1995. The widely expected move, announced Friday, marks the sixth consecutive rate increase from the BOJ since 2024, when the central bank began unwinding three decades of ultra-loose monetary policy from a historic low of minus 0.1%.

This decision aligns Japan with a broader global trend of monetary tightening, as major central banks around the world ramp up interest rates to combat soaring inflation driven by rising energy prices. The recent Iran war has disrupted energy shipments through the critical Strait of Hormuz, pushing up global oil and gas costs. Just this week, the U.S. Federal Reserve raised its benchmark rate for the first time in more than three years, and the European Central Bank implemented its own rate hike earlier this September.

Japan faces a unique set of interconnected economic pressures that have necessitated this policy shift. For nearly 30 years, the country grappled with stagnant growth, persistent deflation, or extremely low inflation, but recent years have brought a reversal of that trend. While the latest official data shows core inflation eased slightly to 1.7% in August from 1.8% in July, remaining just below the BOJ’s 2% target, inflation remains a growing concern for Japanese households.

As a nation heavily dependent on energy imports from the Middle East, Japan is particularly exposed to supply disruptions stemming from the conflict in Iran. Beyond inflation, the country has also struggled with a steep decline in the value of the yen, which hit a 40-year low against the U.S. dollar in August. In response, Japan and the United States launched a coordinated currency intervention to halt the yen’s slide — the first joint intervention of this kind since 2011, when the two countries acted to weaken the yen in the wake of the devastating Tohoku earthquake and tsunami.

U.S. Treasury Secretary Scott Bessent has openly pressured BOJ Governor Kazuo Ueda to continue raising rates to support the yen, stating that Japanese authorities should “do the right thing” to stabilize currency markets. Both Japanese finance officials and the U.S. Treasury have also confirmed they stand ready to conduct additional joint interventions if the yen’s decline continues.

Market analysts note that the end of Japan’s era of ultra-cheap borrowing is a landmark shift for the global economy. “One of the world’s last sources of ultra-cheap money is disappearing,” explained Lale Akoner, market analyst at investment firm eToro. Akoner added that if the yen fails to strengthen despite higher interest rates, persistent inflation pressure could force the BOJ to accelerate monetary tightening faster than markets or the Japanese government currently expect.

Higher interest rates typically attract foreign investors seeking higher returns, which usually strengthens a nation’s currency. As Japan aligns its monetary policy with other major global economies, the central bank’s gradual rate hikes are designed to address domestic economic challenges while bringing Japan into line with global monetary conditions.