In typical Trump style, U.S. President Donald Trump’s January 12 announcement of stiff new tariffs on Iran’s trading partners was devoid of almost all essential details. It also proves that this U.S. president does not quite understand the difference between sanctions and tariffs, but why should he split hairs? These executive policy choices all bring pain to an economic opponent, some with more focus than others, so why get bogged down in the details? And Trump announcements without details provide an extra news cycle or two of interviews for the Washington pundit cadre and the global media’s “instant experts” on the topic of the hour.
Mr. Trump announced the new steps January 12 on his Truth Social outlet, adding that his decision was “final and conclusive.” He said, “Effective immediately, any country doing business with the Islamic Republic of Iran will pay a tariff of 25 percent on any and all business being done with the United States of America.” This announcement can mean almost anything to Iran’s and America’s trading partners, all of whom are anxiously waiting for details.
Iran already heavily sanctioned, causing major disruptions
Fortunately for most of the planet, Iran is already among the most sanctioned nations in the world, thus the new economic pain will be contained, and by no means could the tariff decision alone spark any kind of regime change in Tehran. But it does allow the Trump foreign policy team to sleep better at night, knowing that something new has been announced while demonstrations continue in Iran. Waves of western sanctions have pulverized the OPEC member nation’s economy, causing sustained high inflation, unemployment and triggering a collapse of its currency, the rial.
Most analysts believe the country’s economic distress is the root cause for the current demonstrations, and the economic pain is indisputably a major contributing factor. The country’s Gross Domestic Product (GDP) per capita fell from more than $8,000 in 2012 to just over $6,000 by 2017 and down to a little above $5,000 in 2024, according to World Bank data, and economic sanctions are a key driver.
Readers should recall that UN’s nuclear-related sanctions on Iran were formally put back in place in September, in the so-called sanctions “snapback” process.
In terms of trade partners, Iran’s top five export markets are China, Turkiye, Pakistan, India and Azerbaijan.
China is the key country to watch, as China has been Iran’s top trading partner since 2016. The trade has provided an “economic lifeline” to Iran, and last year China took around 80 percent of Iran’s oil exports, aided by a heavily sanctioned shadow fleet. Media reports suggest China was considering increasing its purchase of Iranian oil in the light of the American intervention in Venezuela. Also, let us not forget how much China’s support matters for Russia’s war efforts in the last years.
The potential new U.S. tariffs come just months after Washington and Beijing proclaimed a trade truce, bringing down China’s tariff from more than 100 to 35 percent following a meeting between President Xi Jinping and Trump in October on the sidelines of the Asia-Pacific Economic Cooperation summit in South Korea. We leave it to the pundits to debate how the new measures will impact Trump’s planned trip to Beijing in April this year.
Reactions begin registering
Mr. Trump’s decision spurred a powerful verbal blast from Beijing. “China firmly opposes any illicit unilateral sanctions and long-arm jurisdiction,” Liu Pengyu, Chinese Embassy spokesman in Washington, posted on social media, as reported by the New York Times. He added that China would “take all necessary measures to safeguard its legitimate rights and interests.”
Iran’s other major trading partners, including America’s NATO ally Türkiye, Iraq and the United Arab Emirates, have not yet responded to Mr. Trump’s statement, probably still waiting for details. Their Iran-based commercial attaches should in fact be packing their bags and heading home, or at least looking for secure shelter as American residents in Iran have been advised to do.