Up First briefing: Iran’s economy; Trump’s ballroom; Bond market : NPR

Transcript

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SACHA PFEIFFER, HOST:

The White House is doubling down on economic pressure to choke off Iran’s economy.

LEILA FADEL, HOST:

The U.S. has not sanctioned the governments that buy Iran’s oil, but that may change. China is Iran’s biggest customer. Could it face consequences?

PFEIFFER: I’m Sacha Pfeiffer. That’s Leila Fadel, and this is UP FIRST from NPR News.

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PFEIFFER: The Supreme Court is expected to weigh in on President Trump’s ballroom construction. A lawsuit argues he needed congressional approval. Trump is framing the ballroom as part of the military complex with drone ports and bomb shelters.

FADEL: And the bond market is flashing a warning sign for the economy. That market plays a big role in setting interest rates when the government has to pay more to borrow money, so does everyone else. Stay with us. We’ll give you the news you need to start your day.

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FADEL: The Trump administration is threatening crippling new economic pressures on Iran. They want that pressure to force Iran back into negotiations over the Strait of Hormuz.

PFEIFFER: Treasury Secretary Scott Bessent says next week, he’ll lay out what new economic pressure on Iran looks like. Diplomatic efforts to revive peace talks have completely stalled after a temporary ceasefire was called off weeks ago.

FADEL: With us is NPR’s Emily Feng to explain the latest. Good morning, Emily.

EMILY FENG, BYLINE: Good morning, Leila.

FADEL: So the U.S. has already – it already has so many sanctions on Iran, so much economic pressure on Iran. So what exactly is the president threatening beyond what’s already being done?

FENG: Well, he wrote on Truth Social, the social media site, that any country that allows institutions or businesses to provide, quote, “any type of lifeline to Iran will itself face tremendous economic consequences.” He appears here to be referring to activity like smuggling Iranian oil out or helping Iran buy goods abroad. As you know, though, the U.S. already has extensive sanctions that makes a lot of international trade with Western countries impossible.

And already in June, the U.S. took it one step further. They put secondary sanctions on entities that were helping Iran evade sanctions. So as Sacha mentioned earlier, Treasury Secretary Bessent said he’s going to hold a press conference on Monday to explain what this new, quote, “economic D-Day” – as President Trump is calling – will entail. But what is notable to me is the focus seems to be on countries and their governments now, so not just on businesses and economic fronts. And the big question that stands out is how this might affect China.

FADEL: OK. Wait. How is China connected to this?

FENG: So until now, the U.S. has sanctioned entities that ship or refine oil or move money around that allows China to buy about 80- to 90% of Iran’s oil before the war. But the U.S. has largely held off on sanctioning the governments of those entities, governments like that of China’s. That might change. China has been one of the top places for money laundering and financial fronts for moving Iranian money around. The U.S. Treasury actually sanctioned several of those fronts in June, and China was the only country that Bessent mentioned, you know, singled out this week. Here’s an interview he did with CNBC yesterday.

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SCOTT BESSENT: Reopening of the Strait benefits China. Unfortunately, they’d been buying – they were the largest consumer of Iranian oil. They were buying about 90% of it.

FENG: Though when he was asked specifically if China might be targeted under these new economic pressures, Bessent declined to answer.

FADEL: Interesting. Iran’s economy was already struggling before the U.S. and Israel started this war. How is it faring now, and will even more sanctions work?

FENG: That is the big question. Iran’s economy is struggling even more. A U.S. blockade has cut its economy off from the rest of the world. People there cannot get goods from outside the country for the most part. But Sina Toossi, a senior fellow at the think tank Center for International Policy in Washington, says ideological hard-liners now have control of parts of Iran’s government. So the economy is not their priority.

SINA TOOSSI: There’s this existential threat that the Iranians have been faced with, so they’re willing to bear much greater economic costs to kind of secure their survival. Whereas for the U.S., it’s ultimately, you know, for the average American, the average voter, we have much less at stake here.

FENG: He notes Iran does want promises of sanctions relief. They really want the U.S. to unfreeze tens of billions of dollars of Iranian assets abroad. But there’s also widespread distrust of the U.S. and arguably laying on even more sanctions on Iran would only increase that distrust and make the case that the U.S. will never allow for sanctions relief on Iran.

FADEL: NPR’s Emily Feng. Thank you, Emily.

FENG: Thanks, Leila.

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FADEL: The Supreme Court is expected to weigh in on whether President Trump can continue construction of his ballroom.

PFEIFFER: A nonprofit group sued the administration. An appeals court ruled in the nonprofit’s favor earlier this month and said construction needed to stop, but the court paused its order until today.

FADEL: NPR White House correspondent Deepa Shivaram is with us now to discuss. Good morning, Deepa.

DEEPA SHIVARAM, BYLINE: Good morning.

FADEL: So catch us up on what the Supreme Court is deciding on exactly.

SHIVARAM: Yeah. It’s been a lot of start and stop with this. But to put it simply, last fall, Trump knocked down the east wing of the White House to construct a 90,000-square-foot ballroom. It’s costing hundreds of millions of dollars. And while Trump has said that taxpayers will not have to pay for any of it, The Washington Post has reported that some of the cost will fall on the public. NPR hasn’t independently confirmed that, though. And so after he starts construction, a nonprofit group called the National Trust for Historic Preservation sues the Trump administration and says that Trump needs congressional approval in order to build the ballroom.

Lower courts have hashed out this lawsuit for months, and now the Supreme Court will decide what happens next. The Trump administration is arguing that the ballroom was needed to create a, quote, “integrated military complex” that houses medical care, a drone port and bomb shelters. On the other hand, the National Trust for Historic Preservation is saying that the executive branch doesn’t have the authority to transform the White House like this, even for national security purposes.

FADEL: Does the president think the court will rule in his favor?

SHIVARAM: Yeah. So earlier this week, he said that he can’t imagine that the Supreme Court is ruling against the ballroom, and he said that while he took the press out for a tour of the ongoing construction on the South Lawn of the White House. This is different than the ballroom, by the way. There’s generally a lot of projects Trump has going on at once, and he really likes talking about them. But he’s building a new helipad on the South Lawn, and when he was showing that off to reporters, he was describing the ballroom being used to host foreign dignitaries, like China’s Xi Jinping, who’s expected to visit the U.S. soon.

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DONALD TRUMP: They get out of the car and they walk down this path onto that, and they can have cocktails and everything outside of the White House, and then they go into the ballroom. Even the military – they can use it like that. And we have – the ballroom is so much a military component with the drones, and the bomb shelters and everything else that we have in there.

SHIVARAM: And that pivot of referring to it as a ballroom slash military complex and really putting the security part of this, you know, on the forefront has been something Trump started doing when the courts started weighing in on this construction and saying there was a possibility of this getting shut down. I will just point out though, Leila, it’s not just the courts Trump is having to contend with here.

His ballroom is really unpopular in the public eye. A poll from ABC News, Washington Post, Ipsos shows that 56% oppose the ballroom. At the same time, polling also shows that a vast majority of Americans also think the president isn’t focusing on the most important issues. In addition to Trump’s construction projects not being popular, his economic policies aren’t popular, and his war with Iran isn’t either.

FADEL: I mean, construction of the ballroom, though, has been going on since last October. So what happens to a not-quite-finished ballroom/military complex if construction has to stop?

SHIVARAM: Yeah. This is kind of a logistical nightmare, right? Because the ballroom is already getting built. Millions of dollars have already been spent. The areas near the White House have been closed off for months because of the construction. So if the court says that Congress needs to come in and approve this, it’s not like Congress moves at lightning speed either, right?

FADEL: Right.

SHIVARAM: So having an unfinished ballroom slash military complex that completely raised over the old East Wing of the White House, it’s complicated, and the whole situation sort of speaks to Trump’s decision-making process and how he treats the courts because now the Supreme Court’s kind of in an awkward position here.

FADEL: That’s NPR’s Deepa Shivaram. Thank you, Deepa.

SHIVARAM: Thank you.

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FADEL: It was another sell-off in financial markets.

PFEIFFER: The Trump administration had tried to calm market jitters and keep the government’s borrowing costs in check, but investors dumped both stocks and bonds on Thursday.

FADEL: NPR’s Scott Horsley joins us to discuss. Hi, Scott.

SCOTT HORSLEY, BYLINE: Good morning, Leila.

FADEL: Good morning. So we don’t often talk about the bond market, but it does appear to be flashing a warning sign. What’s going on?

HORSLEY: Yeah, earlier this week, the yield on government debt jumped to its highest level in almost two decades. That’s the payoff that investors demand in return for lending money to the government. Carl Tannenbaum, chief economist at the asset management company Northern Trust, says there are three reasons bond yields have been going up.

CARL TANNENBAUM: One, we have a very large and growing national debt. Two, inflation continues to be a little higher than we would like to see it. And three, the demand for borrowing, especially long-term borrowing, has been added to by the immense AI buildout.

HORSLEY: Big tech companies are borrowing a lot of money to build their AI data centers, and the government has to compete with that to find lenders of its own. The government’s interest costs have jumped about 15% this year to more than a trillion dollars a year.

FADEL: How’s the Treasury Department responding?

HORSLEY: On Wednesday, the Treasury Department announced it would buy back more of its government bonds, effectively refinancing some of the government’s long-term debt with somewhat cheaper short-term debt. And that move was intended to kind of reassure investors and tamp down those sky-high yields. Treasury Secretary Scott Bessent told CNBC he thinks the bond market is overreacting and there’s no reason for yields to be this high.

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BESSENT: The underlying economy, I think, is very strong, and the only inflationary impulses that we’re seeing are coming from the energy, which is temporary.

HORSLEY: Of course, we’re almost six months into the Iran war now, and gasoline prices are still high. The Treasury Department’s action did provide a little relief in the bond market, but it did not last. Yields came down on Wednesday, but yesterday, they bounced back up again. They’re not as high as they were earlier in the week, but the financial markets are still jittery.

FADEL: What does that say about the Treasury Secretary’s credibility?

HORSLEY: You know, Bessent is a former hedge fund manager, and he essentially said on CNBC, I know better than the market does. But the market’s reaction suggests investors aren’t willing to take that on faith. Carl Tannenbaum says the buyback program that was announced this week is pretty small in the scheme of things, and, you know, it only runs until just after the midterm election.

TANNENBAUM: Typically, when governments attempt an intervention of this kind, they need to commit to doing it in a very large size and for a very long time. And investors are questioning whether Treasury has that commitment.

HORSLEY: Bessent also told CNBC the government can grow its way out of that $40 trillion in debt. Certainly, economic growth would help, but right now the economy is growing at an annual rate of about 2%, and we’re piling up debt at a rate of nearly 6%. That’s not a roadmap to fiscal success.

FADEL: What does all this mean for people who are not active investors in the bond market?

HORSLEY: Well, the bond market plays a big role in setting interest rates. So when the government has to pay more to borrow money, so does anyone getting a mortgage or a car loan or trying to bankroll a business. Mortgage rates, for example, have climbed close to 6.7%, and those high borrowing costs are keeping a lot of would-be homebuyers on the sidelines.

FADEL: NPR’s Scott Horsley. Thank you, Scott.

HORSLEY: You’re welcome.

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FADEL: And that’s UP FIRST for Friday, August 21. I’m Leila Fadel.

PFEIFFER: And I’m Sacha Pfeiffer. Today’s episode of UP FIRST was edited by Rebekah Metzler, Emily Kopp, Mohamad ElBardicy and Alice Woelfle. It was produced by Paige Waterhouse and Nia Dumas. Our director is Kaity Kline. We get engineering support from Carleigh Strange. Our technical director is Eowyn Fain, and our executive producer is Jay Shaylor. Join us again on Monday.

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