Trump risks end of China trade war truce through Iran tariffs

On the face of it, an announcement of 25% tariffs against any nation trading with Iran amounts to a major escalation of Donald Trump's global trade war.

But China, Iran's biggest trading partner, has kept its reaction pretty brief and pretty bland.

"There is no winner in a tariff war," Foreign Ministry spokeswoman Mao Ning said, "China will firmly safeguard its legitimate and lawful rights and interests."

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It is exactly the sort of thing China tends to say when it's still rushing to figure out the details.

Indeed, it feels fair to assume that China is holding fire because, like the rest of the world, it is probably unsure how this new announcement will apply and to whom.

Trump offered no explanation for instance on what "doing business" with Iran actually amounts to and crucially, whether China's tariff truce with the US would leave it exempt.

In theory, China should be first in line for this extra tax.

While it is Iran's biggest trading partner, it is also one of a relatively limited list of countries still willing to circumvent US sanctions to buy from it despite the international backlash over the regime's treatment of protesters seeking an end to clerical rule in the country.

Analysts have estimated that China buys at least 80% of Iran's shipped oil, possibly as much as 90%. Exact figures are not published.

In addition, China has significant investments in Iran with Chinese companies financing construction and infrastructure projects.

But the context of the US China relationship is everything here.

Months of damaging tit-for-tat trade warring was eventually paused in November when a truce was agreed by Xi and Trump. The bargain was hard won and negotiated over months, bringing China's average tariff rate down from 145% at the height of the standoff to around 47%.

In exchange for this reduction Trump achieved certain things that were important to him such as an agreement to up the purchases of US soybeans, the de-blacklisting of certain US firms, and a loosening of access to crucial rare earth minerals.

An increase of China's tariff rate now would almost certainly provoke it to retaliation, all these hard won gains could, in an instant, be lost.

Add to the mix the fact that Trump says he plans to visit Beijing in April and his intimation that stability in the relationship is desirable, and him carving out some sort of exemption for China feels increasingly likely.

There is also precedent for this.

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In the summer India was hit with an additional 25% tariff in retaliation for the country's purchase of oil from Russia.

Despite the fact China buys more than India, it was not subject to the same treatment, almost certainly because a broader deal was in the process of being struck.

An additional 25% tariff for China would be punishing right now at a time when its economy is still struggling with slowed growth and high unemployment. It would bring the average rate to over 70% an amount that makes almost all trade with the US inviable.

But China has learnt over the last year that being strong and unrelenting with Trump has worked for them.

It knows it has the power and leverage to push for an exemption, and be in no doubt that is exactly what it will be doing behind the scenes.

If it doesn't get it, expect a retaliation, and expect it to be severe.

(c) Sky News 2026: Trump risks end of China trade war truce through Iran tariffs