Shafaq News/ The economic relationshipbetween Iraq and the United States—historically anchored in oil andreconstruction—is under pressure after a surprise policy shift from Washington.
On April 2, President Donald Trumpannounced a 39% tariff on Iraqi exports as part of a broader nationalist tradepush. Though oil is exempt, the move casts a long shadow over a strategicpartnership that has weathered war, instability, and shifting global markets.
A Longstanding but Uneven Trade
Economic ties between the two countriesdate back to the early 20th century, deepening significantly after the 2003US-led invasion of Iraq. Reconstruction efforts and foreign investment,particularly in energy, fueled trade growth. By 2024, bilateral trade reachedover $17 billion, driven mainly by Iraqi oil exports and American industrialand pharmaceutical imports.
Oil remains the centerpiece of Iraq’strade with the US. In January 2025 alone, Iraq exported more than 7 millionbarrels of crude and derivatives, according to the US Energy InformationAdministration (EIA). These shipments generate an estimated $10 billion inannual revenue for Baghdad, creating a trade surplus of roughly $5.7 billion.
“Iraq currently enjoys a trade surplus ofnearly $6 billion with the US, primarily due to oil exports to refineries inTexas and California,” economist Ziyad Al-Hashemi stated. “This is a keybargaining point in Iraq’s favor during any future trade negotiations.”
By contrast, non-oil exports remainmarginal. Data from the Iraqi Ministry of Planning and UN trade statistics showa limited footprint: $13 million in printed publications, just over $600,000 inalcoholic beverages, and a few hundred thousand dollars’ worth of foodproducts, gypsum, and butane. Monthly non-oil exports to the US still averagebelow $1 million, underscoring the depth of Iraq’s reliance on a singlecommodity.
On the import side, the US sent Iraqapproximately $9.5 billion in goods in 2024, spanning machinery, vehicles,medical supplies, telecom equipment, and food products. American firms play akey role in Iraq’s recovery, ranking the US fifth among Iraq’s top suppliersafter China, South Korea, Ukraine, and Iran.
From Trade Policy to Political Leverage
At first glance, the tariff appears to bepart of Trump’s broader push to cut trade deficits. However, given Iraq’snarrow export base and heavy reliance on oil, the move carries deeper strategicimplications. With crude shipments untouched, Washington’s decision seems lessabout economic protectionism and more about exerting political pressure onBaghdad.
“Iraq can redirect its oil elsewhere. Thebigger hit might come to American exporters and consumers,” Al-Hashemi noted,emphasizing that the tariff could backfire on US businesses.
Market reaction was swift. Brent crudeprices fell by nearly $2 per barrel following the announcement. Though oil isexempt, analysts warn of indirect effects. Economist Abdul Rahman Al-Mashhadanicautioned that trade restrictions could slow global growth, reduce demand, anddepress oil prices, posing a risk to Iraq’s revenue stream. “With oilaccounting for 95% of Iraq’s budget, the impact could be severe,” he toldShafaq News.
Al-Mashhadani also pointed out that Iraq’soil exports to the US—between 250,000 and 450,000 barrels per day—are vital toAmerican refineries. Any future tariffs on oil could raise costs for US fuelproduction, potentially weakening demand.
While the direct financial losses for Iraqare minimal, the political implications of Washington's move are more profound,raising concerns about economic sovereignty and alternative partnerships.
Limited Damage, But a Bigger Message
Iraq’s non-oil exports are too small tosuffer major financial losses from the tariffs. In 2021, they totaled just over$700,000, and though they saw a modest uptick in 2024, the economic impact remainssymbolic rather than substantial. Yet, the message is clear: Iraq must rethinkits reliance on oil and explore alternative trade partnerships.
For US exporters, however, the effectscould be more tangible. Sectors such as agriculture, pharmaceuticals,construction equipment, and technology may face retaliatory shifts in Iraqiprocurement. With Iraq already deepening economic ties with China and Russia,American businesses risk losing market share.
Strategic Fallout: A Shift in Alliances?
Beyond trade, the tariff decision risksstraining an already delicate regional alliance. Iraq plays a critical role inUS-led counterterrorism efforts and regional energy cooperation. The impositionof steep tariffs—even if largely symbolic—raises questions about Washington’scommitment to Iraq’s economic stability.
Meanwhile, China’s Belt and RoadInitiative has given Baghdad an alternative source of infrastructure funding,and Russia’s energy sector is expanding in Iraq. If Washington’s goal is topush Iraq toward economic diversification, it may instead be acceleratingBaghdad’s pivot toward Eastern powers, reshaping alliances in the Middle East.