Escalation in the U.S.-China Trade War: Will It Halt Iran or Push It Over the Edge? By Charles Taylor (Florida)

On May 3, 2025, President Donald Trump escalated the ongoing U.S.-China trade war by threatening to sever all trade ties with any nation purchasing Iranian oil, with a pointed focus on China, the largest importer of Iran's oil. This move, which Trump framed as a strategy to pressure Iran into ending its nuclear program, has sparked intense debate. Will this economic hammer force Iran to capitulate, or will it push the nation—already strained by sanctions—over the edge into further defiance or collapse? Let's unpack the implications of this escalation, examining its potential to either restrain Iran or exacerbate regional instability.

The U.S.-China trade war, which began in 2018, has already seen tariffs, export controls, and diplomatic spats disrupt global markets. Trump's latest threat marks a new phase, intertwining trade policy with geopolitical strategy. By targeting nations buying Iranian oil, Trump aims to choke Iran's primary revenue source—oil exports, which account for a significant portion of its economy. China, importing around 1 million barrels per day from Iran (as of early 2025 estimates), is the linchpin of this strategy. Trump's statement, as reported, dismisses the idea that this is a Hollywood plot, instead framing it as a serious economic weapon: "The oil industry is the central pillar of the Iranian economy, and President Trump wants to make it impossible for them to export any oil at all."

This isn't the first time the U.S. has targeted Iranian oil. The Trump administration previously imposed "maximum pressure" sanctions in 2018, withdrawing from the Iran nuclear deal (JCPOA) and reimposing sanctions that slashed Iran's oil exports from 2.5 million barrels per day to under 500,000 by 2020. Biden's administration softened this approach, allowing limited waivers for allies like China, but Trump's return in 2025 signals a return to hardline tactics. Now, by threatening to cut off trade with China entirely, Trump is raising the stakes to an unprecedented level.

The logic behind Trump's strategy is straightforward: starve Iran of oil revenue to force concessions on its nuclear program. Iran's economy is heavily oil-dependent, with oil exports historically making up 50-70% of government revenue. Sanctions have already crippled Iran, reducing GDP by an estimated 15% since 2018, inflating the rial to over 600,000 to the dollar (as of 2025), and driving inflation above 40%. If China, Iran's largest buyer, were to stop purchasing oil, Iran's exports could drop to near zero, potentially halving its remaining revenue.

This economic strangulation could, in theory, force Iran to the negotiating table. The Iranian regime has shown resilience, using tactics like shadow tanker fleets and bartering to evade sanctions, but losing China as a buyer would be a devastating blow. State Department spokesperson Tammy Bruce emphasised this goal: "These sanctions are being imposed pursuant to President Trump's maximum pressure campaign to drive Iran's oil exports, including to China, to zero." If successful, Iran might halt uranium enrichment (currently at 60%, per IAEA reports, close to the 90% needed for a bomb) or cease supporting proxies like Hezbollah and the Houthis, which destabilise the region.

However, Iran's response to past sanctions suggests otherwise. Rather than capitulate, Iran has accelerated its nuclear program—stockpiling enriched uranium from 1,200 kg in 2019 to over 5,000 kg by 2025—and increased regional aggression, including attacks on Saudi oil facilities (2019) and Houthi strikes on Red Sea shipping (2024). The regime's survival depends on projecting strength; backing down under pressure risks domestic unrest, as seen in the 2022 Mahsa Amini protests, which killed over 500 and led to mass arrests. Economic hardship might weaken Iran's government, but it could also embolden hardliners who view nuclear capability as their ultimate deterrent.

The alternative scenario is that Trump's trade war gambit pushes Iran over the edge, not into submission but into desperation or collapse, with dire consequences. Iran's economy is already on life support, with youth unemployment at 30% and 50% of the population living below the poverty line. Cutting off oil exports to China could trigger a full economic collapse, potentially leading to mass protests or regime change. While this might seem like a win for U.S. policy, the fallout could be catastrophic.

A desperate Iran might escalate its nuclear program, calculating that a bomb is its only leverage. The regime could also intensify asymmetric warfare—more drone attacks on Gulf states, Houthi disruptions in the Red Sea, or cyberattacks on U.S. infrastructure (like the 2023 attack on U.S. water systems attributed to Iran). State Department spokesperson Tammy Bruce noted Iran's role in "terrorism around the world," and a cornered Iran might double down on these activities to project power and rally domestic support.

Regional instability is another risk. Iran's collapse could create a power vacuum, empowering groups like ISIS, which exploited Syria's civil war to rise in 2014. Neighbouring states like Iraq, already fragile with 40% youth unemployment and militia influence, could face spill-over effects. Saudi Arabia and Israel, both U.S. allies, might welcome Iran's weakening, but fear the chaos of a failed state on their doorstep. Israel, in particular, has conducted airstrikes on Iranian targets (e.g., 2024 strikes in Syria), and a desperate Iran might retaliate directly, risking a broader conflict.

China's response is pivotal. As the world's second-largest economy, China relies on Iranian oil to fuel its industries, importing 10% of its crude from Iran. Trump's threat to end all trade with China—bilateral trade was $760 billion in 2024—is a high-stakes bluff. China might defy the U.S., as it did during earlier sanctions, using alternative payment systems (e.g., yuan-based trades) and shadow fleets to buy Iranian oil covertly. Beijing has already retaliated in past trade spats, imposing tariffs on U.S. agricultural goods and restricting rare earth exports, critical for tech manufacturing. A full trade cut-off would devastate both economies, disrupt global supply chains, and spike oil prices—potentially to $150 per barrel, per 2025 OPEC projections.

Alternatively, China might reduce Iranian oil purchases to avoid U.S. tariffs, seeking supplies from Russia or Saudi Arabia. This would align with Trump's goal but risks fracturing U.S.-China relations further, potentially escalating into a broader economic or military confrontation. China's Belt and Road Initiative includes Iran as a key partner, and Beijing may view U.S. pressure as a threat to its regional influence, prompting a stronger alliance with Iran and Russia.

The outcome hinges on Iran's resilience and China's calculus. If China complies and halts Iranian oil purchases, Iran's economy could collapse within months, potentially forcing negotiations—but only if the regime prioritises survival over ideology. More likely, Iran will double down, accelerating its nuclear program and regional aggression, as it has historically done under pressure. The regime's rhetoric—"Death to America" chants at Friday prayers—suggests defiance, not capitulation. Economic collapse might spark revolution, but the Islamic Revolutionary Guard Corps (IRGC) has a tight grip, with 150,000 active personnel and a history of crushing dissent.

Pushing Iran over the edge seems the more probable outcome. The regime's survival instinct, coupled with its ideological commitment to resisting the "Great Satan," points to escalation rather than retreat. A collapsed Iran could destabilise the Middle East, empower extremists, and draw the U.S. into another costly conflict—ironic, given Trump's campaign promises to avoid "endless wars." Even if Iran halts its nuclear program, the cost might be a humanitarian crisis, with 80 million Iranians facing famine or displacement, per UN worst-case scenarios.

Trump's escalation of the trade war by targeting Iranian oil buyers is a high-risk strategy with no clear winner. It might temporarily hobble Iran's economy, but the regime's history suggests it will lash out rather than surrender. China's response will determine the policy's teeth—if Beijing defies the U.S., the trade war could spiral into a global economic crisis, with oil prices soaring and supply chains breaking. If China complies, Iran faces collapse, but the regional fallout could be worse than the problem Trump aims to solve. This isn't a Hollywood script, as Trump claims, but it risks a tragic ending—one where neither Iran is halted nor stability preserved, but instead, the Middle East descends into deeper chaos.

https://michaeltsnyder.substack.com/p/this-is-the-biggest-economic-story

"The president of the United States just threatened to end all trade with China if the Chinese do not stop buying oil from Iran. I realize that this sounds like something that Hollywood would dream up, but this isn't a plot from an episode of your favorite television show. This is really happening. President Trump has decided to raise the level of economic pressure on Iran to the maximum in a last ditch effort to force the Iranians to make a deal to end their nuclear program. The oil industry is the central pillar of the Iranian economy, and President Trump wants to make it impossible for them to export any oil at all. So he is threatening to completely cut off all trade with any nation that purchases any amount of Iranian oil.

This is what a trade war looks like when it goes nuclear.

President Trump is pledging that any nation that buys Iranian oil "will not be allowed to do business with the United States of America in any way, shape, or form". He didn't mention China specifically when he wrote this, but Trump knows that China buys far more oil from Iran than anyone else.

For some reason, the mainstream media is mostly ignoring this story. But State Department spokeswoman Tammy Bruce has confirmed that this is now U.S. policy and that China in particular is being targeted…

"These sanctions are being imposed pursuant to President Trump's maximum pressure campaign to drive Iran's oil exports, including to China, to zero. China is by far the largest importer of Iranian oil. The Iranian regime uses the revenue it generates from these sales to finance attacks on U.S. allies, support terrorism around the world, and pursue other destabilizing actions," State Department spokeswoman Tammy Bruce said.

This is it.

We really have reached a moment of truth.

In 2025, approximately 90 percent of all Iranian oil exports have been purchased by China…

Shipping data from cargo tracking company Vortexa shows that 90 percent of Iranian oil exports are purchased by China, and Iranian oil exports to China hit a record high of 1.8 million barrels per day in March, Reuters reported, citing ship tracking data.

China isn't going to stop buying oil from Iran.

I hope that I am wrong about that, but I do not believe that I am.

And I do not believe that Trump is bluffing either.

So it appears that we are about to see a full shutdown of all trade with China.

Most Americans have absolutely no idea what that will mean for us.

It is being reported that "90% of the inputs in prescription drugs consumed in the US are imported", and a "significant portion" of those inputs are produced by the Chinese…

"Estimates show that 90% of the inputs in prescription drugs consumed in the US are imported," said Torsten Sløk, chief economist at Apollo. A significant portion of that comes from China, making it a major supply chain risk.

Ongoing tariff disputes between Washington and Beijing have investors on edge, especially in healthcare and pharmaceuticals, where any price shock could ripple across the industry and impact both investors and patients.

This is a really big deal, because as I have discussed previously, more than 60 percent of all U.S. adults are currently taking at least one pharmaceutical drug.

According to supply chain analytics company Exiger, about 80 percent of the active ingredients in our pharmaceutical drugs come from China…

According to a report from the supply chain analytics company Exiger released last week, the US relies on China for as much as 80 percent of active pharmaceutical ingredients. For generic antibiotics, in particular, the dependence is much higher at 90 percent.

If there is a complete shutdown of trade with China, you are going to see drug shortages like you have never seen before.

I wish that I was exaggerating, but I am not.

Even 95 percent of our ibuprofen comes from China.

Good luck getting ibuprofen when none is coming across the Pacific Ocean.

Of course there will be shortages in countless other industries as well.

Right now, most of our computers and phones are made in China…

According to Bloomberg, the U.S. relies on imports from China for a majority of the following products by value: game consoles (86%, $6 billion), PC monitors (79%, $5 billion), smartphones (73%, $41 billion), lithium-ion batteries (70%, $16 billion), and laptops (66%, $32 billion).

This means consumers and businesses that need these products will have few to zero alternatives for products that do not come from China.

Our stores are filled with televisions, appliances, toys and other products that are made in China.

I hate to say it, but our economy literally cannot function normally without Chinese-made goods.

We should have never allowed this to happen, but this is the reality of the scenario that we are now facing.

The good news is that it appears that the Chinese are still leaving the door open for a potential deal…

China has said it's evaluating approaches from US officials to start negotiations about tariffs, a potential deescalation in the trade war that has raised hopes formal trade talks could start soon.

"If we fight, we will fight to the end; if we talk, the door is open," China's commerce ministry stated on Friday. "The tariff war and trade war were unilaterally initiated by the United States. If the United States wants to talk, it should show its sincerity and be prepared to correct its wrong practices and cancel the unilateral tariffs."

Hopefully the U.S. and China will sit down and talk, and hopefully both sides will be in a mood to make significant compromises.

Because if we stay on the path that we are currently on, it will be a nightmare.

Even before the trade war erupted about a month ago, many U.S. consumers were stocking up in anticipation of the coming tariffs…

Similarly, according to a survey of 1,000 consumers by NielsenIQ done in March, 31% of consumers said they were stocking up on groceries in anticipation of tariffs while others said they were expediting non-grocery purchases before tariff-related price increases took effect.

Have you been stocking up?

I hope so.

If there are any Chinese-made products that you will need in the months ahead, get them now.

If all trade with China is suddenly brought to a screeching halt, it is going to throw our society into a state of great chaos."