This is an audio transcript of The Rachman Review podcast episode: ‘America’s waning power’

Gideon Rachman
Hello, and welcome to The Rachman Review. I’m Gideon Rachman, chief foreign affairs commentator of the Financial Times. This week’s podcast is about American foreign policy. It was recorded last weekend at the FT Weekend festival in New York in front of a live audience. My guests are Kevin Rudd, the former prime minister of Australia; Katherine Thompson, who until recently was a senior official in the Pentagon under President Trump; and Philip Gordon, who was national security adviser to vice-president Kamala Harris.

So after a second war with Iran, where is Donald Trump taking US foreign policy?

Donald Trump voice clip:
We took in more oil yesterday than we’ve ever than has ever gone through the strait. You probably see that. We have an oil gusher. The strait is totally open, you know that, and we’re negotiating. We’ll see how that all goes. But we have two things. We have an open strait, and we have a country that will never have a nuclear weapon, will never, ever have a nuclear weapon.

Gideon Rachman
Donald Trump continues to insist that America won its war with Iran, but even many of his supporters in Congress are openly sceptical. And there’s another group closely associated with the America First movement that remains bewildered by Trump’s decision to go to war in the first place.

Katherine Thompson worked closely with Pete Hegseth, who’s now known as secretary of war. But she was and is sceptical of the decision to attack Iran for a second time. So I began the conversation in New York by asking Katherine Thompson what the Iran war tells us about the past and future of American foreign policy.

Katherine Thompson
I think it’s really thrown a wrench into this idea of the America First vision, and one of the big projects that was worked on for the first year of the Trump administration was the development of the national security strategy and the national defence strategy.

It was a significant sea change in what had been the conventional wisdom in the sort of post-cold war unipolar moment, 1990s, 2000s, 2010s for the most part. We were deviating from that. We were saying America doesn’t have the resources to be the world’s policeman. America, particularly with the rise of China as a great power, needs to grapple with this new dynamic.

We are not the pre-eminent hegemon. We have to grapple with what that means and what constraints that puts on us, and we perhaps have been quite overextended for the better part of the last two decades. And so that was a vision that was articulated to some extent by the president on the campaign trail.

It really resonated particularly with middle America and some of the forgotten pockets of American society. And I thought we had a good thing going, especially after the first year. Our allies in Europe committed to spending more. We were doing very limited operations in the Middle East. I thought we were gonna stop there, particularly with the Houthis and then Operation Midnight Hammer.

The big concern with Operation Midnight Hammer was obviously that it could go further into full-scale regime change, and it was quite a success, I thought, when it stopped short of that.

Gideon Rachman
This was the June 2025 . . .

Katherine Thompson
Correct.

Gideon Rachman
. . . intervention, the 12-day war. Yeah.

Katherine Thompson
Yes, correct. And I thought we had achieved something there where both pre- and post-Midnight Hammer, there seemed to be conversations with the Iranians on basically the same docket of items that have come out in response to the MOU.

And so, I’m part of, I guess, the contrarian side of the Washington elites in foreign policy that would say, “We didn’t have to go this far. We didn’t have to do Epic Fury to have the conversations that the administration is now having.” And I think now the US is in a worse position in that negotiation.

We’re on the back foot. We’ve expended a hefty amount of munitions. We have done this at the expense of other priority theatres that we’ve articulated in a strategic vision that was very powerful, and we’ve gotten bogged down and put on the back foot, and I think that’s kind of dangerous.

Gideon Rachman
It seems to me that you’re closest to the vision that people sometimes identify with vice-president Vance, the more restrainer, fewer wars and so on, and yet Trump has now committed himself to a war. Do you think it won’t be seen now as a kind of aberration and that you can get back to that vision that you were trying to promote of a more restrained America with fewer security commitments around the world? Or is that all just kind of blown up now?

Katherine Thompson
I think on the strategic vision side, I think we’re at a crossroads. We either now have the opportunity with the MOU, if it holds, then I think we have an opportunity to pivot back on to the strategic doctrine and the strategic vision that was outlined, focus on the western hemisphere, focus on deterrence by denial in the first island chain of the Indo-Pacific.

And so strategically, I think there’s an opportunity to get back to the original vision. The problem is the number one person that controls that is in the White House, and he has to decide that that’s worth implementing because implementation is the other half of the game in terms of strategic doctrine. You can write all the doctrine you want, but you have to actually do it.

Gideon Rachman
Isn’t the fundamental flaw for you, restrainers, who have a kind of worked-up vision of the world, is that the person who’s meant to execute it is Donald Trump, and he is a very flawed president?

Katherine Thompson
Yeah, but I think the question is: can that project live on beyond Donald Trump? Because the strategic vision is not Donald Trump. This has been percolating in Washington for a long time, and so will there be somebody else beyond Donald Trump to take up the mantle? And will our resource constraints allow us to choose any other path but taking up sort of a more restrained mantle?

Gideon Rachman
OK. So Philip Gordon, you were obviously advising vice-president Harris during the campaign, but you’ve got a much longer history. You were involved with the Iran negotiations. How much of a disaster is this for America in the Middle East and for the Middle East region? Do you think it’s just another conflict, things will get back on track? Or have we seen a fundamental shift?

Philip Gordon
More the latter, Gideon. I think it’s hard actually to overstate the degree to which this is a fundamental disaster for the United States. If you do a net assessment of this war, what did we achieve and what were the downsides, you could give the administration credit for setting back Iran’s military.

That was one goal, and I’m willing to acknowledge that that was done significantly, though not as much as they promised because Iran still, it turns out, maintains ballistic missiles and drones and could shut down the Gulf. So that’s on the plus side.

On the downside, it costs American taxpayers tens of billions of dollars. Over $100bn surely if you take into account added costs, threaten the world economy. You had Asian countries going down to four-day work weeks because they couldn’t get enough energy. Vastly depleting our military resources, interceptors, diverting strategic assets — including and especially military ones — from the alleged priority of the Indo-Pacific to the Middle East, which we were trying to pivot away from. Empowering Russia with an oil windfall, leaving Ukraine short of interceptors, deeply straining our alliances.

You can notice here it’s much easier for me to riff on the downsides than the very minimal upside. So I think it’s a strategic catastrophe for the United States. Even worse, the price we’re paying to get out of it is also extraordinary. My view for the past several months, in fact, has always been that Donald Trump would eventually declare victory and go home. So I’m not stunned at that approach, but I have to say I never imagined it would be this degree of concession.

Gideon Rachman
You’re thinking of the unfreezing of assets, the $300bn reconstruction fund, the fact that there still may be tolling of the Strait of Hormuz. I mean, Iran does look like it’s coming out of this bizarrely in a stronger position than before the war.

Philip Gordon
Absolutely. I’m thinking of all of those things, plus the immediate ability to sell oil. If there’s anything we did to get leverage over Iran, to get the 2015 nuclear deal and more recently, it was the sanctions on oil sales.

This MOU, vice-president Vance, speaking of which, spent the week saying that there’s nothing up front, it’s delivery for delivery. The MOU says — I can see why they didn’t want to put out the actual text — immediately Iran can resume oil sales. That is hundreds of millions of dollars per day and tens of billions of dollars per year.

That they get now. We’ll have to see if it sticks, but that was an immediate concession. And for what? Not for a comprehensive nuclear deal or refraining from supporting proxies in the region or capping ballistic missiles, but for taking us back to where we were on February 28. We got Iran to pledge never to develop a nuclear weapon, which is a pledge that they had made many times before, and we got it to open the Strait of Hormuz, which was open before the war, toll-free for, as the text says, 60 days only.

And so they’re going to start getting revenues from that. So if the set-up here is I was supposed to disagree with Katherine, I actually agree with one thing you said, which is that if they had stopped after Midnight Hammer, they might have something to defend. The over-reach in trying to take it one step further is what has led to a genuine catastrophe.

Gideon Rachman
And Kevin, what do you think America’s closest allies — of which Australia clearly is one, a key ally in the Indo-Pacific — what do they make of all this?

Kevin Rudd
I think the first thing is, if you look at the transatlantic and Indo-Pacific allies, they have a laser-sharp focus on what now unfolds in Geneva and whether anything will be extracted on the future of the Iranian nuclear weapons programme, both in terms of nukes themselves, but also ballistic missiles. That’s been the core focus of all allies, which gave rise, of course, to the JCPOA. So we suspend judgment for 60 days and see what transpires.

Second, though, the roll-on effect in terms of the real economy, both in Europe and across the Indo-Pacific, of the extraordinary hike in global oil prices and ongoing questions about future hikes on the back of levies being imposed by the Iranian regime, confounding most of the treasuries among the allies in terms of net impact on growth. You’re already seeing a downwards revision of global economic growth, and that flows through to everybody, and including emerging economies where you’ve had a 50 per cent increase in the price of fertiliser, for God’s sake.

Now, the third one for the Indo-Pacific specifically is along these lines. The Chinese have a saying, which is, “Whenever we get in trouble with US-China relations, our old friend, the Middle East, comes to our help.”

And that is the third time now. One, in terms of Afghanistan; second, in terms of Iraq; and third, in terms of Iran. And that is this diversion of collective American political bandwidth, national security lens and focus, and most critically, as we’ve barely touched on, ordnance and resources, and the extraordinary attrition of ordnance and resources which has occurred over the last three to four months, is what the folks in Beijing will be focused on in particular.

Gideon Rachman
Yeah, I should have mentioned that as well as being a former prime minister, you’re also a scholar. You’ve written a book On Xi Jinping thought. What do you think Xi Jinping will be thinking about this? And it’s specifically, there’s been this big debate in America in sort of strategic circles about is China preparing to invade Taiwan? Is 2027 the date? How do you think all of these developments will be affecting that kind of thinking?

Kevin Rudd
Ultimately, the conclusion from the research is that Xi Jinping is an unreconstructed Leninist, who is an acute student of power, both in terms of his own party — look at what he’s done in terms of purges within the party and the Chinese military to further consolidate his own standing as the country’s undisputed leader — but in the world as well.

And so his calculus is constantly where does the balance of power lie with the United States in the Indo-Pacific theatre, specifically in and around Taiwan contingencies? So where do I come out in terms of where I fear his own analysis is taking him? By the end of next year, he’ll be reconfirmed at the 21st Party Congress as China’s general secretary of the Communist Party. That’ll be his fourth consecutive term. That is a big slice of time as Chinese leader, and with no intention of retiring anytime soon. He gets that under his belt by the end of next year.

The second big trigger in my mind is what happens in the Taiwanese national elections of January 28, where there is an even-money bet whether the pro-independence party called the DPP gets re-elected. And if it does, does Xi Jinping regard this as his tripwire against China’s own stated anti-secession law of 2005 to initiate military action?

And the third variable in all of this is his net calculus of US capability and intent in what will then be the last year of President Trump’s presidency. The capability set has been somewhat diminished because of what we’ve just described in terms of the utilisation of a large amount of ordnance arsenal magazine depth, but there’s a parallel calculation in terms of his analysis of President Trump’s resolve on the question of Taiwan.

Therefore, ‘28 for me becomes a very disturbing year in terms of global and Indo-Pacific regional stability when the risks of a crisis, conflict and even war over Taiwan become greater. Not yet a probability, but a rising possibility, and we need to be clear-sighted about that.

Gideon Rachman
Katherine, when you were in the Pentagon, you were working very closely with Elbridge Colby, who is noted for having written a whole book on the strategy of denial, which, as I recall, argued that America doesn’t have the resources to do everything, so needed to concentrate on deterring China specifically over this question of Taiwan.

I would have thought for Colby in particular, another war in the Middle East, as Kevin described, is like the answer to China’s prayers. So how do you think he and those people who wanted to prioritise China within the Trump administration are thinking? Are they concerned? Are they thinking of resigning, or do they think they can pull it back?

Katherine Thompson
Well, I can only speak for myself, but I think from my perspective as a fellow traveller in the prioritiser/restrainer camp, the resource problem is significant and made worse by Iran. It hasn’t gone away, and the actual actions to course-correct in any form I don’t think are taking shape. So as a prioritiser, I’m extremely concerned, and as a former Senate staffer, I’m also concerned about how this is playing out in the budget discussion because this is fundamentally a math problem, right?

The president is seeking a $1.5tn defence budget, $350bn, and that is a gamble on the fact that Congress is gonna pass some sort of third reconciliation bill. I don’t know if you know this, but Congress does not strategically prioritise anything. And so I wouldn’t put my gamble on getting my $350bn, $70bn of which is for replenishment of our interceptor stockpiles to replenish our magazine depth.

I wouldn’t put it all on Congress getting to pass one more bill before the midterm elections. I think that’s really concerning. I don’t think that helps the math problem. I don’t think we’re gonna get the money to be able to do that. And more to the point, I don’t think that the prime defence contractors, despite committing to increasing production on some of these very high-value interceptors, they have not committed to accelerating any kind of timeline because they can’t.

We can’t just produce Patriot, Thaad, Tomahawk missiles tomorrow. And so I think that prioritisation of the Indo-Pacific in particular and pivoting back to those priorities is a math problem. And until we start grappling with those details, and until this is an exercise that both the administration and Congress come together to deal with, I am very worried about our ability to do that.

Gideon Rachman
As I understand it, even Colby was slightly ambiguous on the question of whether America should actually fight if China attacked Taiwan, but that’s pretty crucial in the way that China will be thinking about it. What is your view of how Donald Trump would think about it? Because I guess that adds a layer of danger if the Chinese think, “This guy’s never gonna defend Taiwan.”

Katherine Thompson
Yeah. And I think he’s been, up until this point, somewhat ambiguous, but he made a comment about viewing Taiwan almost like Ukraine, like we have an expectation that Taiwan pays for its own defence, almost like he needs to see more out of Taiwan for that to be a calculation. And I don’t think that he would necessarily go to the mat for Taiwan in the same way that, in the Iran conflict we’ve seen him go to the mat for Israel as an ally.

I think that there’s a different sort of strata structure in how he thinks about alliances. But I think the other calculation, which I assume the Joint Staff would probably advise, is even if President Trump did wanna fight for Taiwan, can we win? Does the math actually add up for us to win that fight? I think that’s probably the bigger consideration than whether or not Donald Trump loves or hates Taiwan.

Gideon Rachman
Yeah. Without giving away any national secrets, you were sitting in the Pentagon thinking about those questions, so can he win?

Katherine Thompson
I wasn’t a maths major or anything, but from my simple scratch paper maths that I did before I came in here, not seeing a very optimistic picture. And despite some of the comments, I guess, that have been made from the administration on the munitions picture, I would instruct everyone who’s curious about this to look at the budget request.

Why then are we asking for 1,000 per cent increase in Tomahawk production? Why are we going from 55 Tomahawks to now asking for 785 Tomahawks if we didn’t have a munitions crisis, if we didn’t have a munitions and stockpile problem? You know, you didn’t just inherit this crisis from the Biden administration, then the depletion of resources for Ukraine.

You also exacerbated it by engaging in a war that was gonna deplete strategic interceptors and also hit your naval and air assets. We haven’t done the calculation on how much it’s gonna cost for us to replace those things. Those are assets we also need in the Indo-Pacific. So I don’t think the math problem presents a very optimistic picture, I’ll say that. And normally I am an optimist, so I smile through the pain as I say this.

Gideon Rachman
OK. So Phil, pulling back a bit, you obviously think that Trump made a terrible decision going to war this latest time in Iran, but it seems to be a terrible decision that America keeps making. I mean, why is America getting dragged back into conflict in the Middle East? And is it a habit that can be broken, should be broken?

Philip Gordon
Yeah. I’ll answer that, but I’d like a word on this not inconsequential question of whether we’re gonna go to war with China on Taiwan first.

Gideon Rachman
Oh, that. Yeah.

Philip Gordon
Yeah. because joking aside, nobody can know for certain what a US president would do in a contingency where we were required to go to war against China over Taiwan.

The point, I think, is our job is to make that as unlikely as possible by making sure that Taiwan has what it needs to defend itself, by deterring China, by making it clear to Beijing that it would pay an enormous cost if it did so. And that’s where I worry that President Trump’s approach may make war or conflict more likely rather than less.

He just had a summit with Xi Jinping. He didn’t officially change Taiwan policy in the way that many suspected he might have. But the way he talked about the issue, especially afterwards, dismissing the 1982 assurances to Taiwan as it was a long time ago, talking about Taiwan as a small country very far away, talking about how bad a war with China would be, which it obviously would be, that made me concerned that he was lowering the perceived cost to Beijing, which undermines what we’re really trying to do in deterring that war.

Gideon Rachman
OK. Well, actually then I’ll give you a pass. We’ll come back to the Middle East, I’m sure. But Kevin, I just want to ask you about the sort of broader question of how America’s closest allies, that would include Britain, Australia, Japan, South Korea, all these countries which for decades have built their foreign policy around a tight alliance with the US. How over the longer term they now view that?

Because one argument would be Trump’s a bit of an aberration, the underlying structures are still there, keep betting on America. But then there will be others who say in Europe, Trump has actually threatened Greenland, part of a European country. He’s fundamentally unreliable, and he hasn’t been thrown up by accident. There’s something in America that has produced the President Trump. We’ve got to fundamentally rethink the reliance on America. How do you see that debate?

Kevin Rudd
Let me cheat as Phil just did and give one sentence on China and Taiwan, and then answer your broader question. Since 1949, every American president has succeeded in deterring China from taking Taiwan by military force.

They’ve all done it in slightly different ways, but basically the deterrence equation has held. And what is deterrence? It’s causing Chinese leaders, one after the other, to conclude that there is a significant risk of losing that would be beyond the political threshold test of survivability of that leader or the party if you were to fail.

And that has been made up, this combination of capabilities and strategic intent, for the better part of seven decades. It’s been enormously successful. Republicans, Democrats, right through that period of time, and it can continue to be successful. I always call it the SMTX: the shaving mirror test of Xi.

I’m Xi Jinping, I’m having a shave of morning, I’m looking in the mirror, and I’m saying, “Mirror, mirror on the wall, can I take Taiwan and have it all?” And we want the mirror to say back, “Well, not yet. Too risky.” And qualitatively, the decisions taken by a Chinese political leader are hard to predict. Our job, in terms of those who wish to sustain strategic stability, is to continue to reinforce that level of difficulty.

On the broader question of allies as they look to the United States, I can’t speak for the European allies because I’m not a European. But for the Indo-Pacific allies with whom we work intimately, I think there is a view that whatever disruptions occur in bilateral arrangements with the United States during the period of this presidency, these allies are looking through to the medium- to long-term future.

And if you look at the US-Korea relationship, the US-India relationship, the US-Japan relationship, the US-Philippines relationship, and that with Australia, Aukus submarines, etc., these are in reasonably good working order. The final point is what Trump has said to all allies is lift your national defence effort.

And by and large, that’s been successful. And therefore, the response by the Indo-Pacific allies has been to do that, and the European allies, it’s been a more variable picture. So therefore, what’s our posture is that whatever discomfort arises from the tariff agenda, the isolationist debate in the United States, etc., etc., the Indo-Pacific allies look through this and see America is a Pacific power. In its national security strategy and its national defence strategy, as Katherine said before, it makes plain what its posture is for the long term. We take that seriously, so we are robust enough to navigate the bumps on the way through.

Gideon Rachman
OK, and to the last question. Mark Carney made a big splash with this argument: It’s gone, the old American ally, and that middle powers should work together much more closely because of America’s unreliability.

What do you think of that argument? I mean, maybe they’re not mutually exclusive. You continue to have the American alliance, but you do more with other middle powers.

Kevin Rudd
No, I think they’re entirely compatible because look at Canada, there is no conceivable national security threat to Canada that doesn’t immediately impact the United States, simply because of continental geography.

Gideon Rachman
What about the United States itself as a threat to Canada? (Laughter)

Kevin Rudd
Yeah, right. And the . . . (Laughter) What I was about to say is, to the Indo-Pac allies and the European allies, it’s more complex because the theatres are more removed.

So on the indispensable nature of United States, as it were, strategic ballast in the fabric of a greater military effort from all allies, the view is the security order should be sustained. Where Mark Carney’s argument comes in is, how do you build through the collective efforts of middle powers, including countries like Australia, Canada, for example, the Japanese, the Koreans, roll in some Europeans.

What you can do collectively through their efforts is reinforce the ballast of the international economic order. You can do so, for example, on the international trading order by reinforcing the WTO and as it relates between, for example, the European Union, the Trans-Pacific Partnership economies, of which there are 11 plus India, all of whom happen to be democracies, all of whom actually adhere to a WTO rules-based system.

And then with the UN system, where you’ve got multilateral humanitarian agencies under financial duress, stepping in to provide the ballast which is now needed because the United States is reducing its effort. So I think in terms of his concept of middle powers contributing to supplements or additions or strengthenings of the rules-based order, it’s compatible with sustaining our alliance structure with the United States.

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Gideon Rachman
That was Kevin Rudd, the former prime minister of Australia, ending my recent panel discussion in New York, and you also heard from Philip Gordon and Katherine Thompson.

And before we leave, I thought you might also be interested in getting a flavour of my colleague Edward Luce’s interview with Rahm Emanuel. He was President Obama’s former chief of staff and is now widely thought to be considering a run at the presidency. Here he is talking about the Iran talks.

Rahm Emanuel
They looked at the uranium and they realised, “Oh, that’s like a 10-year project. Why have nuclear weapons when we can have the nuclear option?” And it’s called the Strait of Hormuz, as you’re seeing right now as we’re talking play out.

They have a nuclear arm and they hold the world economy. They’ve also discovered that while the president thinks he wrote a book called The Art of the Deal, they’re gonna teach him a lesson, which is the Persian lesson, the art of the negotiation, and he just got schooled unbelievably.

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Gideon Rachman
We’re going to publish an edited version of the interview which focuses on Rahm Emanuel’s views on Democratic Party strategy as a bonus episode, which you can look out for in a couple of days.

Thanks for listening, and please join me again next week when I’ll be back in London.

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