By Mohammad Eslami

U.S.-China Trade war: What does it mean for Iran?

August 13, 2019

TEHRAN – U.S.-China trade war has been one of the game changers among the geopolitical factors affecting the international political and economic sphere. The 10pc tariff will be imposed on the $300bn/yr of imports from China not yet subject to any duties, Trump announced via Twitter a day after the latest round of talks, which concluded in Shanghai.

 As a result, China’s yuan tumbled to the weaker side of the key 7-per-dollar threshold, hitting its weakest since 2008, against the backdrop of a sharp escalation in the protracted U.S.-Sino trade war. The United States has accused China of manipulating Yuan and the U.S. Treasury Department designated China a currency manipulator, a historic move that no White House had exercised since the Clinton administration.
While Iran is under the pressure of the toughest sanctions policy in international history, Tehran declares the sanctions as "economic terrorism" and China is still buying the Iranian heavy crude oil, Ups and downs of trade negotiations and confronting economic policies had occurred between two world powers, does specific meanings to Iran.

 Political Aspects

The U.S. and China, two UNSC permanent members, are among the signatories of the Joint Comprehensive Plan of Action. The violation of the deal by the Trump administration and the decision to impose more extraterritorial sanctions made an either-with-us-or-against-us dilemma which is not followed by the Chinese government. The Iranian question here refers to two possibilities. Whether China would leave the position to confront the U.S. sanctions and stop buying Iranian oil in order to be more concentrated on the trade war, or consequently got mere serious in bypassing the sanctions against Iran legally and practically.

 After 8th May 2018, China declared that it would stop buying oil from Iran due to the legal and financial concerns over the sanctions. When hopes for an early settlement of the yearlong U.S.-China trade war dimmed, the route changed. While China has not imposed levies on crude oil imports from the United States, it’s purchases of U.S. crude have dropped sharply from record levels last year.

 Simultaneously, it is continuing Iran oil imports. China imported Iranian crude oil in July for the second month since a U.S. sanctions waiver ended, according to research from three data firms, with one estimate showing some oil entered tanks holding the country’s strategic reserves.

 Economic factors

However, the political dimension is not the only important consequence of the trade war. Yuan historic drop affects the cost and benefit of bilateral trade between Iran and China. Iran's revenues from exports (U.S. dollar-based revenue) would expand compared with imports costs (Yuan-based).

 Although the long term effects of the trade war could lead to inflation in the Chinese domestic market and worsening of trade tensions would reduce China’s growth by around 0.8 percentage points over the following 12 months, which would mean the reduction of the demand for crude oil too. The growth reduction and reduction of demand will make the freight costs more important and the competitive price of Iranian oil will be more attractive. 

 Strategic Planning

Above all, the future of the trade war is the fate of the hegemonic U.S., from the Iranian point of view. It can be meant as the end of the age of U.S. dominance. A range of problematic dilemmas both domestic and internationally including the sanction regime, the maritime security and the security of the Strait of Hormuz, Iran's engagement in the international financial and banking system, the flow of foreign investment, and so on would be affected by the future of the U.S.-China trade war more or less.

The dynamics of the crisis shows that Iran would benefit in the either-with-us-or-against-us playground which is designed by the OFAC regulations. Although Iran's policy for engaging the international community as the outcome of the JCPOA is ruined by the destructive policies of the White House, the evidence confirms that Trump's long-term presidential effects will benefit Iran.
 

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