US President Donald Trump on Monday announced a 25% tariffĀ on any country that does business with IranĀ “effectively immediately.”
Trump wrote on his Truth Social platform that “any Country doing business with the Islamic Republic of Iran will pay a Tariff of 25% on any and all business being done with the United States of America,”Ā while giving few otherĀ details.
The move comes as the IranĀ faces its largest and most sustained antiā€‘government protests in years, triggeringĀ a brutalĀ crackdownĀ that has reportedly killed thousands and led to the arrest of more thanĀ 10,000 people.
The tariffs appear to signal the US’sĀ response to the unrest, coming after the Trump administration publicly ruled out military action in Iran.
Why will China beĀ impactedĀ most by the new tariff?
China is the primary buyer of Iranian oil, which remains under international sanctions over Tehran’s nuclear program. According to Kpler, an energy tracking firm in Brussels, Belgium, China receivedĀ around 80% of Iran’s crude exports last year.
To keep sanctioned oil flowing, IranĀ relies on a sophisticated shadow-fleet network, including ship-to-ship transfers ā€” often in Southeast Asian or Arabian Gulf waters ā€” and the relabeling of oil cargoes as originating from other countries, such as Malaysia or the United Arab Emirates (UAE).
An oil tanker tracker by the US nonprofitĀ United Against Nuclear Iran estimated that China receivedĀ 19.5 million barrels of Iranian oil last year.Ā TheĀ shadowĀ trade is estimated to generate $43 billion (ā‚¬37 billion) annually in unreported revenue forĀ the Iranian government, according to the US Energy Information Administration (EIA).Ā
This income is a lifeline for the Iranian economy,Ā propping up an isolatedĀ regime squeezed by sanctions, chronic inflation and a rapidly devaluing currency.
Beyond oil, Iran exported $12.9 billion worth of goods globally in 2024, with more than a third of those non-oil exports destined for China, according to the UN’s Trade Intelligence and Negotiation Adviser (TINA). Nearly 40% of Iranā€™s goods imports ($8.95 billion) also came from China in the same period, underscoring the depth of the economic relationship.
Other major trading partners of Iran likely toĀ beĀ hit by the new 25% tariff includeĀ Turkey ā€”Ā which receives nearly a quarter of Iran’s non-oil exports ā€” India, the UAEĀ and Pakistan. Entities from the four countries alsoĀ reportedly serve as facilitators in Iran’sĀ sanctioned oil trade.
How does Trump’s latest tariff fuel tensions with China?
Although it is unclear whether Trump’s newĀ tariff would apply only to goods, include services like banking and shipping, target indirect business tiesĀ or set any minimum thresholds for “doing business” with Iran, the new tariff could bringĀ significant risks for China.
It would raise the cost of Chinese exports to the US by an additionalĀ 25%,Ā potentially pushing total duties to 45% or moreĀ on top of existing rates, making them less competitive in the USĀ market.
The new levy also risks derailing the fragile US-China trade truce, agreed in October,Ā when the two powers stepped back from an all-out trade war by putting new tariff hikes on hold, pausing China’s rare-earth export controls and committing to resume major USĀ soybean purchases.
Trump’s move could spark a major retaliation from China, whichĀ was among the few countries to hit back atĀ his administration with full tit-for-tat measures on US imports last year.
On Tuesday, BeijingĀ labeledĀ the new tariffĀ “illicit unilateral sanctions”Ā and vowed to protect its national interests, while analysts have warnedĀ the levyĀ could disrupt global supply chains and oil markets.
Oil prices jumped on the news, with US benchmark West Texas Intermediate (WTI)Ā crudeĀ up 2% to $60.74 by late morning European time on Tuesday.
Will TrumpĀ risk progress in trade talks with Beijing?
Whether the Trump administration would exemptĀ China from the new tariff is far from clear. Creating a carveā€‘out for Beijing would undermine the tariff’s stated purpose, which isĀ to pressure IranĀ by isolating its remaining economic allies.
Enforcing the tariff strictly, however, risks provoking a major confrontation with Beijing at a moment when US trade talks are already fragile.Ā As one of the US’s largest export markets, China retains considerable leverage in negotiationsĀ with Washington,Ā especially for agriculture and manufacturing.
As well as its dominance of rare earth minerals ā€”Ā neededĀ to produce electric vehiclesĀ and high-end technology ā€” BeijingĀ also controls critical supply chains forĀ key industrial components, which gives Chinese negotiatorsĀ tools to apply pressure if negotiations sour.
Former US Trade Advisor Wendy Cutler warned that the new tariff “underscores just how fragile the trade truce is between Washington and Beijing,” telling news agency Bloomberg thatĀ even if Trump backs down, “some damage has already been done”Ā to trust between the two sides.
Mohammad Ghaedi, a Middle East expert atĀ George Washington University, wrote on social media platform X that the key issue would be “enforceability,” as China uses so-called teapotĀ refineries ā€”Ā non-state-owned facilities ā€”Ā to processĀ Iranian oil and buysĀ via front companies based in third countries.
Ghaedi said if implemented, Trump’s tariff “could seriously reshape Chinaā€™s calculations,” as Beijing may reevaluate whether the benefits of cheap Iranian oil outweigh the hit to its US trade relations.
Maurice Obstfeld, former chief economist for the International Monetary Fund (IMF), told The Washington PostĀ newspaper thatĀ the Iran tariff would be “profoundly self-harming for the U.S.” rather than China and would “not change the Iranians’Ā behavior one iota.”
Edited by: Uwe Hessler