The Rising Powers Strike Back at US Tariffs and Sanctions

Policy Alert #169 | July 5, 2018

Despite international outcry, the United States is continuing its pursuit of protectionist trade policies and dismantlement of the Joint Comprehensive Plan of Action (JCPOA) regarding Iran’s nuclear program. As negotiations over new US tariffs have soured and the Trump administration announced secondary sanctions against countries that continue to import Iranian oil after November 4, 2018, the calls for resistance–and outright retaliation–by the Rising Powers are growing louder.


CHINA

New US tariffs against Chinese products are scheduled to take effect on July 6th, but China’s $34 billion in retaliatory tariffs will only begin after Washington’s move. “The Chinese government’s position has been stated many times. We absolutely will not fire the first shot, and will not implement tariff measures ahead of the United States doing so,” Foreign Ministry Spokesperson Lu Kang announced at a press conference. In an earlier press conference, Kang told reporters that although China does not want a trade war, when confronted by such short-sighted act that hurts both US itself and others, China has no choice but to fight back forcefully, to firmly safeguard the interests of the nation and its people and uphold economic globalization and the multilateral trading system. Kang continued that American trade measures not only hurt Sino-American trade relations, but would also affect global trade, which China firmly opposes. Ministry of Commerce Spokesperson Gao Feng reinforced China’s opposition to protectionism and the system of tariffs: The US has many structural problems of its own, but it always regards other countries as a scapegoat for its own problems and makes unwarranted charges.

China is also standing firm on the Iran deal. On the sidelines of the Shanghai Cooperation Organization summit in June 2018, Chinese President Xi Jinping met with Iranian President Hassan Rouhani and declared: “The Joint Comprehensive Plan of Action is an important achievement of multilateralism, and is conducive to promoting peace and stability in the Middle East, as well as upholding the international nonproliferation regime.” Spokespersons Feng and Kang reiterated China’s support of the Iran deal as well. Feng told reporters, The government of China has always opposed unilateral sanctions by any country based on its domestic laws against other countries. China will continue to maintain normal economic and trade ties with Iran under the prerequisite of not violating its international obligations.” Kang, meanwhile, asserted that the independence, sovereignty and territorial integrity of one country should be fully respected and that China believed that the political system and development path a country chooses should be determined by its own people.

INDIA

In response to the US tariffs, India filed a complaint with the World Trade Organization (WTO) in May 2018, and on June 21, 2018, announced new tariffs on 29 US products valued at $235 million. The tariffs are not scheduled to go into effect until August 4 to provide time for the two countries to work through an alternative. Meanwhile, the eagerly anticipated “2+2” meeting between Indian Minister of Defense Nirmala Sitharaman, Minister of External Affairs Sushma Swaraj, Secretary of Defense Jim Mattis, and Secretary of State Mike Pompeo that was scheduled for July 6 was cancelled abruptly on June 27. This initially prompted concern that the cancellation was related to the tariff dispute; however, it was revealed that Secretary of State Pompeo cancelled the meeting to travel to North Korea as a follow-up to last month’s summit.

India has also taken a hardline stance against the US threat of secondary sanctions for continuing trade with Iran. In response to a question on the issue at a press conference on May 29, 2018, Minister Swaraj replied, “We only recognise UN sanctions. We do not recognise any country-specific sanctions. […] We don’t make our foreign policy under pressure from other countries.” Following a visit by US Ambassador Nikki Haley on June 29, 2018, MEA Spokesperson Shri Raveesh Kumar responded to questions related to Ambassador Haley’s comments on Iran that India “feel[s] that Iran is a very traditional partner. We have historical and civilizational linkages with Iran. We have also communicated our views on Iran’s JCPO and the withdrawal of the US ambassador. Ambassador Nikki Haley has her views and of course our view on Iran is very clear.” Despite the government’s position, two Indian banks, IndusInd and UCO, have reportedly asked members to finish their business in Iran by August 6th.

JAPAN

In a session of the National Diet, Prime Minister Shinzo Abe said of the US tariffs on Japanese goods that “It’s hard for Japan to understand and we cannot accept it.” On the sidelines of the G7 Summit last month, Japanese Minister of Finance Taro Aso responded to media questions that Japan was “considering” filing a complaint with the WTO about the tariffs, and voiced his country’s commitment to free trade: “Inward-looking policies involving one-sided, protectionist measures benefit no country. It’s important to achieve high global growth through free and fair trade.”

On the issue of sanctions against Iran, the Ministry of Foreign Affairs reported that officials from the US and Japan had consulted with each other regarding sanctions against Iran on June 19, 2018, however, given the nature of the report, it does not seem that any meaningful progress was achieved: “Both sides exchanged views on possible impacts of the reinstating of US sanctions on Iran. In addition, both sides also agreed to continue consultation on this issue going forward.” At a news conference on June 28th, Chief Cabinet Secretary Yoshihide Suga explained that the government is working to reduce oil imports from Iran gradually and is attempting to work with the US on the issue: “We’d like to hold thorough consultations with the United States to prevent the move from adversely affecting Japanese companies.”

RUSSIA

Minister of Economic Development Maxim Oreshkin warned in late June 2018 that his country would take action against the US in response to the tariffs: “Because the US continues to apply protective measures in the form of additional import duties on steel and aluminum and refuses to provide compensation for Russia’s losses, Russia is using its WTO rights and introducing balancing measures with respect to imports from the United States.” A complaint with the WTO was formally filed on July 2nd.

Russian Ambassador to the US Anatoly Antonov took the opportunity to address his country’s concerns about the US’s exit from the Iran deal at a US State Department event celebrating the fiftieth anniversary of the signing of the Treaty on the Non-Proliferation of Nuclear Weapons: “We’re alarmed by the future of JCPOA. We call on all the [signatory] countries to act on their obligations clearly and unambiguously.” Minister of Energy Alexander Novak vowed that Russia would pursue its legal options with regards to the US’s planned secondary sanctions: “The memorandum [with Iran] that we signed in 2014 is still in force. We will analyze this situation from the point of view of the legal basis.

 

BRAZIL

  • The Estadão newspaper published a statement released by the Brazilian government affirming that dialogue and respect, the two most powerful tools of diplomacy, are the only viable solution to the issues arising from the Iran nuclear deal and its termination by the U.S. The Ministry of Foreign Affairs explained that Brazil truly believes that the integrity of the regime and avoiding the proliferation of nuclear weapons are in the interests of the entire international community and must be maintained.
  • The Folha de São Paulo newspaper reported that because Trump’s tariffs on steel will not apply to Brazil, the government decided to accept the tariffs on the aluminum and will not impose any retaliatory tariffs against US goods. Brazilian authorities evaluated the situation and concluded that the current tariffs are less damaging to the economy than those that may result in an escalation of the situation.
  • A group of scholars and economists interviewed by the Agência Brasil analyzed the impact on Brazil of the the US withdrawal from Iran nuclear deal. Of the many ways the exit from the Iran deal will affect Brazil, the effects on the oil and gas market were of particular concern. The interviewees explained that because of the US’s dominant role in the international economy, such actions will generate instability in global oil and gas supply lines which could be devastating for Brazil, one of the world’s largest producers of oil and gas.