Iraq scrambled on Saturday to safeguard its vulnerable economy from the fallout of sweeping US tariffs announced by President Donald Trump, amid growing concerns of a wider global trade conflict that could severely affect Baghdad's critical oil revenues.
Prime Minister Mohammed Shia' Al-Sudani convened senior government officials to address the repercussions of Trump's decision to impose a 39 percent tariff on imports from Iraq, framed by the US president as retaliation against an alleged 78 percent Iraqi customs duty on American goods.
However, data from Iraq’s Ministry of Trade revealed that the tariff increase was linked to a significant trade imbalance between the two countries rather than any specific retaliatory measures by Iraq.
The ministry also pointed out that most American products imported into Iraq arrive through intermediary markets due to the business strategies of US firms rather than via direct trade routes.
To mitigate potential economic harm, Prime Minister Al-Sudani directed his administration to strengthen direct trade relations with the United States, enhance cooperation between Iraqi and American financial institutions, and initiate strategic dialogue aimed at balancing the economic relationship.
He further instructed key ministries, including Foreign Affairs, Finance, and Trade, to monitor developments closely and deliver weekly progress reports.
Kamaran Qadir, a prominent Kurdish economist, warned in comments to The New Arab that Trump's tariff policy contradicted sound economic principles and risked destabilising global trade.
He emphasised that while Iraq seldom exports goods directly to the US market, it would be highly vulnerable to indirect consequences, notably through reduced global oil demand and declining crude oil prices.
"These tariffs defy economic logic and could significantly harm industrialised economies," Qadir said, highlighting potential consequences including slower economic growth, increased unemployment, and rising inflation in major markets such as the US, China, Japan, Europe, and South Korea.
For Iraq, OPEC's second-largest oil producer after Saudi Arabia, the stakes are especially high. With oil accounting for more than 90 percent of the country’s revenue, any sustained decline in global oil prices could result in serious financial difficulties.
Iraq’s 2024 budget projections were based on an oil price of $70 per barrel, but current trends indicate a troubling fall towards $45 per barrel.
According to Qadir, this price drop would worsen Iraq’s existing 20 percent budget deficit, placing severe strain on its financial reserves and potentially destabilising the broader economy.
Acknowledging these risks, the Iraqi government has pledged decisive action to protect its economic stability amid escalating international trade tensions.
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