Global trade war escalates as US threatens sanctions against trading with Iran and increases Chinese tariffs

8 August 2018

Global trade war escalates as US threatens sanctions against trading with Iran and increases Chinese tariffs

United States President Donald Trump has threatened to impose trade sanctions on countries that continue to trade with Iran, after the US reimposed sanctions on the Middle Eastern country this week.

“Anyone doing business with Iran will NOT be doing business with the United States,” President Trump said in a tweet on Tuesday (local time).
“I am asking for WORLD PEACE, nothing less!”

In his tweet, the President describes the sanctions as “the most biting sanctions ever imposed”, and says that they will “ratchet up to yet another level” in November.

In a statement released on Monday (local time), the White House said: “President Trump will continue to stand up to the Iranian regime’s aggression, and the United States will fully enforce the reimposed sanctions.”

“The Trump Administration intends to fully enforce the sanctions reimposed against Iran, and those who fail to wind down activities with Iran risk severe consequences,” the statement goes on to say.

Iranian President Hassan Rouhani previously responded to the new sanctions as “psychological warfare”, adding that “[n]egotiations with sanctions doesn’t make sense.”

Earlier this year the US withdrew from the Iran nuclear deal (formally the Joint Comprehensive Plan of Action), under which Iran agreed to limit its nuclear activities in exchange for relief from sanctions.

President Trump criticised the Iran nuclear deal as “one-sided” and believes that economic pressure will force Iran to agree to a new deal.

However, the other parties to the agreement — China, France, Russia, the United Kingdom, Germany and the European Union — remain committed to the Iran nuclear deal, and the European Union has vowed to protect those doing “legitimate business” with Iran.

High Representative of the Union for Foreign Affairs and Security Policy Federica Mogherini and the British, French and German Foreign Ministers released a statement on Wednesday in which they said the deal is “crucial” to global security.

“We deeply regret the re-imposition of sanctions by the US, due to the latter’s withdrawal from the Joint Comprehensive Plan of Action (JCPOA),” the statement said.

“Preserving the nuclear deal with Iran is a matter of respecting international agreements and a matter of international security.”

They also announced an updated “blocking statute” that will enable EU-based businesses to recover damages resulting from the US’ sanctions, and ban EU businesses from complying with the sanctions without authorisation from the European Commission.

“If a company fears legal action taken against it and enforcement action taken against it by an entity in response to American sanctions, then that company can be protected as far as EU legislation is concerned,” British Minister of State for the Middle East told the the BBC.

However, German auto manufacturer Daimler has confirmed it has ceased activities in Iran, despite announcing a joint venture in the country last year.

The Iranian economy is expected to suffer from the sanctions, with the Iranian Rial losing about half of its value after President Trump announced the US withdrawal from the Iran nuclear deal.

The economic situation is expected to worsen when the US blocks Iranian oil sales in November, which could reduce oil exports by up to 50%.

Across the Pacific, the United States has announced further tariffs worth USD $16 billion (AUD $22 billion) on Chinese imports, adding to the USD $34 billion worth of tariffs announced in July.

The 25% tariffs cover 279 products, including electronic components, plastics, chemicals, batteries, farm equipment, and rolling stock.

In its statement announcing the tariffs, the Office of the United States Trade Representative (OUSTR) said the tariffs are “part of the US response to China’s unfair trade practices related to the forced transfer of American technology and intellectual property.”

The OUSTR referred to an investigation completed earlier this year which found that China “uses joint venture requirements, foreign investment restrictions, and administrative review and licensing processes to require or pressure technology transfer from US companies”, “deprives US companies of the ability to set market-based terms in licensing and other technology-related negotiations,” and “directs and unfairly facilitates the systematic investment in, and acquisition of, US companies and assets to generate large-scale technology transfer.”

It also claimed that “China conducts and supports cyber intrusions into US commercial computer networks to gain unauthorised access to commercially valuable business information.”

China has warned that the new US tariffs will trigger further retaliatory tariffs on its part, targeting the farming and mining industries, which would undermine a key voter base for President Trump.