Fears of a renewed global trade conflict have been ignited after former US President Donald Trump announced sweeping new tariffs targeting Iran's trading partners. The move, a response to Tehran's violent crackdown on domestic protesters, has sent oil prices soaring to their highest level since November 2025 and drawn stark warnings from economic experts about worldwide ramifications.
The Tariff Decree and Its Immediate Fallout
In a characteristically bold post on Truth Social on Monday 12 January 2026, President Trump declared a 25 per cent tariff on "any and all business" conducted with Iran, effective immediately. He described the order as "final and conclusive," though specifics on implementation were scant. The announcement prompted an immediate jump in global oil markets, underscoring market jitters over potential supply disruptions and broader economic contagion.
Trump has also been unequivocal on the potential for military escalation, vowing to use force if Iranian protesters are killed and planning to discuss "several options" with senior military officials. This tariff strategy is seen as an attempt to strong-arm the Iranian regime into compliance, despite the US Supreme Court having struck down previous tariff policies enacted by the former president.
Who Faces the Financial Penalty?
Iran, a key member of OPEC, exports to 147 trading partners worldwide. According to 2022 World Bank data, its most significant economic allies include China, Turkey, Pakistan, and India. Trade Data Monitor figures show that in 2025, China purchased over 80 per cent of Iran's shipped oil, a relationship bolstered by Tehran's limited customer base under existing US sanctions. Iranian exports to China were valued at $22bn in 2022.
If fully implemented, experts warn the policy could see countries like China facing a staggering combined tariff rate of 75.2 per cent. The penalty would effectively tax US businesses importing goods from any nation trading with Iran, impacting supply chains for machinery, equipment, foodstuffs, and pharmaceuticals. Other nations with trade links to Iran include the UAE, Germany, South Korea, and Japan.
Reaction has been swift. A spokesperson for the Chinese embassy in the US, Lie Pengyu, stated on X (formerly Twitter) that "Tariff wars and trade wars have no winners" and that China "firmly opposes any illicit unilateral sanctions." He added that Beijing would take all necessary measures to protect its interests.
Experts Warn of Cascading Global Disruption
Economists and political analysts have sounded the alarm over the potential for severe global economic and political fallout. Professor Ashok Kumar, Associate Professor of Political Economy at Birkbeck, University of London, emphasised the strategic risks. "Cutting Iran off from this web of trade does not simply reduce revenue," he explained. "It risks cascading disruptions across supply chains that extend far beyond Iran’s borders."
This concern is echoed by Maurice Obstfeld, former chief economist for the International Monetary Fund, who told The Washington Post the policy could be "profoundly self-harming for the US" and unlikely to alter Iran's behaviour. Professor Kumar further questioned the geopolitical precedent, asking whether major powers would accept Washington effectively vetoing their external trade relations.
The ultimate impact hinges on whether the US can enforce such universal tariffs without inflicting significant damage on its own economy. Furthermore, escalating economic pressure during a period of intense internal unrest in Iran raises critical questions about whether it will foster political change or simply entrench the regime's hardliners and deepen global polarisation. President Trump has countered scepticism by claiming the US will be "screwed" if the Supreme Court blocks his landmark trade policy.
