WASHINGTON, July 9 — A senior economist is drawing a pointed comparison between the current U.S.-Iran nuclear negotiations and former President Donald Trump’s trade war with China, warning that the stakes for global oil markets are uncomfortably high. The talks, which resumed in April 2021 in Vienna, aim to bring the United States and Iran back into compliance with the 2015 Joint Comprehensive Plan of Action, or JCPOA. That deal, signed in July 2015 and implemented in January 2016, limited Iran’s uranium enrichment in exchange for sanctions relief.
The Trump administration withdrew from the agreement in May 2018 and reimposed sanctions, prompting Iran to exceed enrichment limits by July 2019. Other signatories at the table include the United Kingdom, France, Germany, Russia, and China.
The economist notes that Trump’s China trade war began in July 2018 with tariffs on $34 billion of Chinese goods, escalated through 2019, and resulted in a Phase One deal in January 2020, but left structural issues unresolved. Similarly, the Iran talks face hurdles over sanctions relief and nuclear commitments. Oil prices, which spiked to $85 per barrel in October 2018 during the China trade tensions, could see further spikes if talks fail, given Iran’s role as a major OPEC producer (producing about 2.5 million barrels per day in 2020).
The economist advises against ruling out further oil price increases, as market uncertainty persists. The JCPOA’s history is a study in diplomatic whiplash.
The deal was signed in July 2015 and implemented in January 2016. The Trump administration withdrew from the agreement in May 2018 and reimposed sanctions. Iran responded by exceeding enrichment limits by July 2019.
The current negotiations, which began in April 2021, are an attempt to reverse that cycle. The economist’s comparison to the China trade war is instructive. In July 2018, Trump imposed tariffs on $34 billion of Chinese goods.
The conflict escalated through 2019. The Phase One deal in January 2020 left structural issues unresolved.
The Iran talks face a similar dynamic. Sanctions relief and nuclear commitments are the core issues. The economist’s warning is that, much like the trade war, a failure to reach a deal could have consequences for oil markets.
Iran is not a minor player in the global oil market. In 2020, it produced about 2.5 million barrels per day.
When sanctions were reimposed in 2018, Iranian exports fell. The economist notes that oil spiked to $85 per barrel in October 2018, during the China trade tensions. If the current talks collapse, the market could see a repeat.
The economist advises against ruling out further oil price increases. The logic is that uncertainty drives speculation. The talks in Vienna are ongoing, but the economist’s warning is clear: don’t assume a deal is imminent.
The history of the JCPOA and the Trump-era trade war both show that negotiations can drag on. The market, meanwhile, is watching closely.
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