Not Pittsburgh, Penn. Or President Biden will lose the election in Columbus, Ohio. It's the Red Sea.
Iran-backed Houthi rebels are disrupting global shipping, and inflation will rise again between now and the election.
Shipments in this region have plummeted. In mid-November, approximately 5.66 million tonnes of cargo was passing through the Bab al-Mendeb Strait in the Red Sea every week.
By mid-January, this had fallen by 52% to 2.69 million tonnes.
By way of background, when supply chains were disrupted during the lockdown, shipping volumes across the Channel fell by only about 20%, which could easily have been enough to cause inflation.
A similar story can be told about the Suez Canal. In mid-November, the canal was carrying 5.99 million tons of cargo per week. By mid-January, this had fallen by 49% to 3.03 million.
During the lockdown, Suez Canal traffic decreased by only about 23%.
The only time we saw a decline in trade volumes like today was when the famous container ship got stuck in the canal in 2021, and today's decline has been going on for even longer.
This week, the Biden administration and its allies launched airstrikes against the Houthis. But that hasn't made companies comfortable.
At least four oil tankers diverted from the Red Sea the morning after the airstrikes began.
Eradicating the Houthi rebels will be difficult, to say the least. They are guerrillas and the weapons they use are concealed and easily carried. By the time the U.S. Navy acquires a target, the Houthi rebels could launch rockets or drones and put themselves at risk.
But even if the Biden administration succeeds in wiping out the Houthis, it will likely take weeks or months.
Ships that do not go through the Red Sea have to take a longer route around the African continent. This increases her travel time by 40%.
There are other hidden costs as well. Fuel prices are currently rising in Durban, South Africa.
Some say these additional costs and shortages will only affect Europe, since most ships that pass through the Red Sea go there. But this is not true.
When there is a shortage of goods being shipped in Europe, the price of those goods increases.
This will encourage ships previously destined for other places, such as the United States, to take advantage of higher prices and ship to Europe.
In this way, the entire global shipping market will be affected.
The reality is that the Biden administration cannot afford another inflation.
Opinion polls already show that voters think the economy has been mismanaged. Further price increases will undermine the government's credibility.
Then there are interest rates. In a surprising (and some say political) decision, the Fed signaled last month that it may lower interest rates in the run-up to the election.
This would have been a huge gift for the Biden administration to stimulate the economy.
But now, with new supply chain disruptions underway, it seems unlikely the Fed will be able to cut rates.
After all, they got inflation wrong last time when they said they believed inflation was temporary. If they get it wrong again, their credibility will be completely destroyed.
It is difficult to reach any other conclusion. Biden's election prospects are being dragged down by the Middle East.
His poll numbers are expected to decline as global tensions rise. And don't expect his Democratic successor to do any better if inflation returns. The party's confidence in the economy will disappear.
Philip Pilkington is a macroeconomist and investment expert.
