US tariffs ignite confrontation: Will Iraq enter a trade war to protect its rentier economy?
US tariffs ignite confrontation: Will Iraq enter a trade war to protect its rentier economy?
4-5-2025
Information / Special..
In light of the recent US decisions to raise customs tariffs on imports from several countries, attention is turning to Iraq, which relies heavily on a rentier economy, to determine how it will deal with this new wave of protectionist policies, especially in light of its intertwined economic interests with the United States and the increasing pressure on global markets.
Rentier Economy in the Crosshairs
Iraq relies primarily on oil exports, which represent more than 90% of its public revenues. This heavy reliance on a single source of income makes the Iraqi economy vulnerable to any global trade or political shifts. Washington’s decision to impose new customs tariffs may not directly affect Iraq in terms of goods, but it has indirect effects by complicating trade and financial relations, especially if US companies operating or partnering in projects inside Iraq are harmed.
Will Iraq respond with countermeasures?
While major countries such as China have chosen to respond to the United States by placing American companies on the “unreliable entities list,” the question remains: Does Iraq have the capacity—or the courage—to take similar measures?
In this regard, economic expert Nabil Al-Jumaili says: “Iraq does not possess the tools for a real economic confrontation at this stage. It is not in a position to enter into a direct trade conflict with Washington, but it can resort to conservative steps such as diversifying import sources or strengthening cooperation with China and Russia as a long-term strategic option.”
Basra Oil in the Crosshairs
The US tariffs do not directly target Iraq, but their global repercussions—particularly regarding China’s responses—could put pressure on the oil market.
If China, one of the largest importers of Iraqi oil, reduces its imports or diversifies its sources in response to Washington, this could affect Basra crude prices and reduce demand, negatively impacting Iraqi revenues.
Future Scenarios: Caution or Engagement?
Between caution and engagement, it seems that Iraq will lean towards “economic diplomacy,” without engaging in direct confrontations. However, the continuation of global trade tensions may push Baghdad to rethink its economic strategies, particularly regarding diversifying sources of income and reducing dependence on oil.
Although this new US tariff does not directly target Iraq, it is putting pressure on the global economic environment in a way that could harm Iraq’s rentier interests.
In the absence of an effective and coherent economic policy, Iraq could find itself caught between market fluctuations and the conflicts of the major powers, with no clear ability to influence or resist.
Iraq needs gradual economic independence.
Professor James Patterson, a professor of political economy at Columbia University, says, “The Iraqi economy is among the most fragile in the Middle East due to its near-total dependence on oil revenues. Therefore, any disruption in energy markets or trade escalation between the major powers will have direct repercussions on Iraq.
If Iraq does not move towards diversifying its sources of income, it will remain hostage to external variables.”
Patterson also noted that Iraq could play the role of an “economic mediator” between Washington and Beijing, rather than becoming embroiled in polarization, leveraging its extensive ties with both sides
compared to the Gulf states. The difference lies in strategy:
Unlike Iraq, Gulf states have begun implementing long-term economic plans such as “Vision 2030,” which aims to diversify sources of income and reduce dependence on oil. These countries have dealt with the US tariffs based on their relative economic strength and maneuverability, without showing any strong bias toward either side.
In this context, Gulf economic analyst Salem Al-Marikhi says:
“Iraq has the resources, but it lacks political will and clear economic plans. While the Gulf states have invested in infrastructure, tourism, renewable energy, and even artificial intelligence, Iraq remains trapped in a vicious cycle of oil dependence, making it more vulnerable to any external crisis.
An opportunity to reposition itself?
Perhaps this crisis represents an opportunity for Iraq to rethink its rentier economy and initiate serious reform steps. International circumstances require countries to possess flexible tools to deal with crises, and Iraq cannot continue to be a bystander.”
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