Assessing Geopolitical Risk: The Trump-Iran Tensions and Implications for Global Trade and Energy Markets

The Trump administration's re-imposition of sanctions on Iran in 2018, coupled with the 2025 announcement of a 25% tariff on goods imported from countries trading with Iran, has created a seismic shift in global trade dynamics. This policy, framed as a tool to isolate Iran economically, has instead triggered a cascade of unintended consequences, disrupting key sectors and amplifying geopolitical risks. For investors, the interplay of tariff shocks, supply chain fragility, and sector-specific vulnerabilities demands a nuanced understanding of how these policies reshape markets.

Energy Sector: Oil Markets and Geopolitical Leverage

The energy sector remains the epicenter of Trump's Iran strategy. By targeting Iran's oil exports-its primary revenue source-the U.S. sought to force compliance with its foreign policy objectives. However, this approach has tightened global oil markets, with prices spiking as countries like China and India sought alternative suppliers. According to a report by the Congressional Research Service, China, Iran's largest trading partner, imported over $22 billion in Iranian goods in 2022, with oil constituting a significant portion. Despite U.S. sanctions, Chinese refiners continued to purchase discounted Iranian crude via transshipment hubs like Malaysia, illustrating the resilience of alternative trade routes.

The 2025 tariff threat, however, has introduced a new layer of complexity. By warning that U.S. allies and partners who continue trading with Iran would face 25% tariffs, the administration has created a binary choice for countries reliant on Iranian energy. This has forced nations to either absorb higher costs or risk losing access to the U.S. market. For instance, India's imports of Iranian basmati rice and pharmaceuticals now face potential disruptions, while Turkey's machinery and agricultural sectors are similarly exposed. Such volatility underscores the fragility of energy-dependent economies and the leverage the U.S. holds over global trade flows.

Manufacturing Sectors: Supply Chain Fragility and Cost Inflation

Beyond energy, the Trump-Iran tariff policy has disrupted manufacturing sectors, particularly in electronics and automotive industries. The 25% tariff on goods from countries trading with Iran has forced multinational corporations to re-evaluate supply chains. For example, Japan and South Korea-both of which have free trade agreements with the U.S.- now face a dilemma: their trade ties with Iran could jeopardize their access to the American market. This has led to increased operational costs and supply chain rerouting, with companies shifting production to non-sanctioned intermediaries.

In the electronics sector, the reliance on Chinese and Mexican suppliers-both of which trade with Iran-has exposed manufacturers to heightened risks. notes that the tariff threat has created an environment of uncertainty, prompting firms to reconsider sourcing strategies and potentially shift production to more tariff-friendly regions. This shift, however, is not without cost. Elevated tariffs on components and industrial inputs have already led to production delays and inflationary pressures, particularly in the U.S. where consumers face higher prices for electronics and automotive goods.

Agriculture and Pharmaceuticals: Hidden Vulnerabilities

The agricultural sector has also felt the ripple effects of Trump's Iran policies. U.S. exports to Mexico, a key trading partner, could drop by 12% due to retaliatory measures and disrupted supply chains. Similarly, the pharmaceutical industry-critical for global health security-faces indirect risks. India, a major exporter of generic drugs to Iran, saw its pharmaceutical exports to the country reach record highs in 2025. The U.S. tariff threat on countries trading with Iran could increase the cost of Indian pharmaceuticals for U.S. importers, exacerbating supply chain bottlenecks. KPMG's analysis highlights that the life sciences industry is already adapting to tariff pressures by shifting manufacturing to the U.S. or relocating supply chains to lower-cost regions.

Rare Earth Minerals and Tech Supply Chains: A Strategic Bottleneck

The rare earth minerals sector, vital for advanced technologies, has emerged as a critical battleground. China's dominance in rare earth refining-over 90% of global capacity-has made it a focal point of U.S. trade tensions. While the 2025 U.S.-China trade framework partially eased restrictions, companies still face delays in accessing these materials. Iran's own efforts to develop domestic rare earth and lithium industries, driven by its "resistance economy" doctrine, further complicate the landscape. This sector-specific fragility highlights how geopolitical strategies can weaponize supply chains, creating bottlenecks that ripple across industries.

Conclusion: Navigating the New Geopolitical Normal

The Trump-Iran tariff policy exemplifies how geopolitical strategies can morph into economic risks, disrupting global trade and energy markets. For investors, the key takeaway lies in recognizing the interconnectedness of policy decisions and market outcomes. Sectors reliant on international trade-particularly energy, electronics, and pharmaceuticals-are especially vulnerable to tariff shocks and supply chain rerouting. As the U.S. continues to leverage its market access as a diplomatic tool, investors must prioritize resilience in their portfolios, hedging against volatility in energy prices, supply chain disruptions, and retaliatory trade measures.

In this new geopolitical normal, the ability to anticipate and adapt to policy-driven shocks will separate prudent investors from those caught off guard. The lessons from Trump's Iran policies underscore the importance of diversification, strategic sourcing, and a keen awareness of how geopolitical leverage translates into market realities.