In a nearby impactful policy move, former President Donald Trump announced that all countries doing business with Iran will pay a high price. They will face a 25% tariff on any business they do with the United States. With this background, we might ask what the implications of this unprecedented development would be on Iran’s fragile economy and its international trading relations.
Iran has long been a kingpin in the global oil market. With its large oil reserves, it is one of the top ten worldwide oil producers. However, years of short-sighted mismanagement have left scars on the state’s economy. A drop in oil revenues, alongside tough international sanctions, has squeezed Iran’s economy even more. The fallout result of this has been that Iran has been unable to tolerate an inflation rate of 48.4% in October. The Iranian rial has lost 80% of its value against the US dollar since last year, adding pressure to an ongoing economic crisis.
Despite these challenges, Iran has nevertheless been able to reportedly rake in billions through oil imports in 2024. A dense network of shadow shipping routes makes tracking these operations much more difficult. They are displacing the traditional US dollar from oil transactions in favor of the Chinese yuan. These savvy plays have helped Iran supercharge its trade. Significantly, China has filled the gap to become Iran’s top export partner.
In the 12 months preceding October 2025, China imported more than $14 billion in goods from Iran. In this context, this huge purchase serves to underline the importance of their trading partnership. Exports from Iran to Turkey increased drastically. They exploded from $4.7 billion in 2024 to $7.3 billion last year. These developments underscore Iran’s efforts to contend with its growing economic crisis under the weight of international sanctions and tariffs.
Iran’s economy is extremely import dependent, with food representing almost a third of Iran’s total imports. Specifically, the country depends on imports of key staples like corn, rice and sunflower seeds/oils, as well as soybeans. In the twelve months to October, Iran more than doubled its gold imports to $6.7 billion. This is a huge jump from the $4.8 billion it brought in the previous year. Pantheon Macroeconomics and gold has become the country’s top import, as the government implements a strategy of hoarding wealth during times of crisis.
The recent wave of protests across Iran highlights the urgency of the Iranian public’s growing discontent with rising costs of living. Surely, rampant inflation is the greatest danger to social order. Moreover, significant changes in government policy, including cuts to fuel subsidies in December, have deepened this problem. Citizens are expressing their anger on the streets as economic conditions continue to decline. In return, the Iranian regime is responding with an unprecedentedly brutal clampdown on dissent. By some reports, as many as 1,000 people may have died at the hands of security forces during these protests.
The implementation of the tariffs could only be expected to deepen these economic miseries for Iran. The potential reduction in foreign trade due to these tariffs raises concerns that inflation might escalate even more sharply, pushing the economy closer to collapse.
China has counter responded to these developments with much fanfare stressing its commitment to continue protecting its trade interests. A spokesperson stated that China would “take all necessary measures to safeguard its legitimate rights and interests.” This move shows that China is ready to deal with any US tariff-related consequences on their dealings with Iran.