Trump threatens to punish nations trading with Iran: How feasible is it?

US President Donald Trump on August 20 announced what he called the "most severe economic campaign" against Iran, as Washington steps up pressure on Tehran and talks to end the conflict between the two countries have yet to make progress.

On Truth Social, Trump said Iran had "failed to take advantage" of the opportunity to reach a deal and would face "economic war and isolation on an unprecedented scale." He also threatened sanctions against any country doing business with Iran.

"Any country that allows its financial institutions, businesses, airports, or government entities to provide any form of logistical support to Iran will face DEVASTATING ECONOMIC CONSEQUENCES," he wrote. "Oil smuggling, swap channels, cash transfers, exchanges, ship registrations, shell companies – all must stop NOW. You know who you are. This will be an ECONOMIC D-DAY, and we need all Allies to stand with the United States of America to isolate and defeat the threat from Iran."

Iranian Foreign Minister Abbas Araghchi dismissed Trump's latest economic sanctions threats, calling them "a distraction from America's own crisis: unprecedented public debt and soaring interest costs."

"The continuation of failed policies will only bring greater failure – and the hostility of the Iranian people. America's economic terrorism threatens the global economy and the sovereignty of nations around the world," he wrote on X.

Iranian state media also dismissed Trump's statement, saying there was nothing new. IRIB television said the US president's remarks came after "the failure of military aggression," while the semi-official Tasnim news agency said the statement was "not a new development" and that the US "has tried for years to block all financial and economic relations with Iran," but Tehran has "learned to overcome these restrictions and has become very adept."

The same day, the United Arab Emirates (UAE) announced an indefinite trade embargo on Iran, accusing Iranian forces of firing two ballistic missiles into its territory. Iran denied the accusation. Earlier this week, Tajikistan and Iran also finalized an agreement allowing Tehran to export oil to Dushanbe.

Who does Iran trade with and in what goods?

Iran is a member of the Organization of the Petroleum Exporting Countries (OPEC), and oil is its main export. Before the war, Tehran exported about 1.3 to 1.5 million barrels of crude oil per day, earning roughly $115 million daily – equivalent to $3.45 billion a month. By May, Iran's crude oil exports had fallen to their lowest level in at least six years, below 300,000 barrels per day, due to the US naval blockade of Iranian ports.

The US has also re-imposed sanctions on Iranian oil, as announced by the Treasury Department on August 19. During the war, Trump temporarily waived sanctions on oil shipments at sea to ease the energy crisis caused by the closure of the Strait of Hormuz. The US granted Iran a full waiver for 60 days allowing Tehran to sell crude oil amid peace talks, under the June Memorandum of Understanding (MOU) between the US and Iran, which expired on August 21.

Iranian Central Bank Governor Abdolnaser Hemmati said on August 20 that the country's oil exports had declined amid the war and sanctions, but authorities had prepared for lower revenues. Iran's non-oil exports since the start of the fiscal year (March 21) to August 16 reached nearly $15 billion, while imports were $17 billion, according to Iranian media citing customs officials. Trade fell 24% compared with the same period last year. Last year, Iran's total non-oil trade reached $94 billion.

Iran's top trading partners include the UAE, China, India, Turkey, and Germany, according to the latest World Bank data. However, the UAE has announced an indefinite trade embargo on Iran this week.

Frederic Schneider, a non-resident senior fellow at the Global Council on Middle East Affairs, said Washington has used every measure against Iran, with a "maximum pressure" campaign aimed at bringing Iran's oil exports to zero through 14 sanctions packages, and a 25% tariff on any country doing business with Tehran. Analysts say US unilateral sanctions on Iran have not always been effective.

"In the past, Iran's crude oil exports hit a record of about 1.7 million barrels per day, with China taking the lion's share. Sanctions raise the cost of doing business with Iran, but they cannot end it," Schneider told Al Jazeera. "China banned its companies from complying with US sanctions in May, applying anti-sanctions law for the first time. Turkey and Pakistan also continue to trade. Turkey's position since 2018 has been that it will not join US sanctions against Iran. As for the UAE's new embargo, it will certainly have an adverse impact."

China

China is considered Iran's largest trading partner, with total bilateral trade estimated between $10 billion and $41 billion annually. The exact figure is difficult to verify because trade data with Iran is not published in China's official figures due to Western sanctions. According to oil analytics firm Kpler, oil is China's main import from Iran. In 2025, Beijing is believed to have purchased more than 80% of Iran's shipped oil, mainly through shadow fleets that evade US sanctions by turning off tracking devices and using false flags.

Iraq

Before the war began in late February, Iran exported $12 billion worth of goods and services annually to Iraq, including $4 billion in direct goods to the Iraqi government such as gas and electricity, and $8 billion to the private sector. Iraq has committed to settling its outstanding debts with Iran, according to Hemmati, while noting that Baghdad is also struggling due to the closure of the Strait of Hormuz and disruptions in oil revenues.

India

India is one of Iran's important trading partners. Total bilateral trade reached about $1.6 billion in 2025, according to India's Ministry of Commerce. India's exports to Iran include basmati rice, fruits, vegetables, and pharmaceuticals. Iran exports dried fruits, nuts, organic chemicals, minerals, and petrochemicals to India. However, New Delhi stopped importing oil from Iran in 2019 after the US imposed new sanctions. Trump's latest warning could prompt India to further reduce trade with Iran.

UAE

The UAE was a key trading partner of Iran. According to the latest data from the Observatory of Economic Complexity (OEC), official goods traded between the UAE and Iran reached $6.2 billion in 2023. The UAE exported about $5.8 billion to Iran and imported about $450 million. Iran imported $2.81 billion worth of phones from the UAE, along with computers, tobacco, and nuts. Iran exported nuts, fruits, spices, crustaceans, and building stone to the UAE. Beyond formal trade, the UAE has long been an important hub for informal trade that helped Iran circumvent global economic sanctions. However, the UAE's declaration of an indefinite embargo is seen as a significant move because Iran depends heavily on its neighbor for critical imports and access to financial markets.

Turkey

Turkey exported $2.3 billion to Iran in 2025, while imports reached $2.2 billion over 11 months, according to official and industry data. Trade has declined since the war began. Turkish President Recep Tayyip Erdogan told Al Jazeera on August 15 that reopening the Strait of Hormuz is a priority for Ankara.

Germany

Germany is Iran's largest trading partner in the European Union (EU). Iran exported about €217 million ($253.6 million) to Germany in the first 11 months of 2025, up 1.7% from the same period. Germany's exports to Iran fell by a quarter to €871 million ($1.02 billion). This year, EU trade with Iran has declined after the bloc imposed new sanctions in January over serious human rights violations and Iran's support for Russia in the Ukraine war.

Russia

Iran-Russia economic ties have deepened since the US withdrew from the 2015 nuclear deal and re-imposed comprehensive sanctions. Russian Energy Minister Sergey Tsivilyov said bilateral trade reached $4.8 billion in 2024, but the potential is greater. Since 2018, bilateral trade has increased 16%, mainly Russian exports of grains, metals, machinery, and industrial goods to Iran. Iran exports agricultural products, food, petrochemicals, and military equipment to Russia. Tehran also supplies Russia with cheap Shahed drones, which Russia upgrades and uses in the Ukraine war.

Can Trump force countries to stop trading with Iran?

Trump did not explain how he would implement this, and it is hard to see what his administration could do beyond the sanctions already imposed on Iranian oil. Shantanu Singh, a lawyer specializing in international trade law, said no country has the right to impose a comprehensive embargo on trade with Iran – or any other country – without UN Security Council authorization. "What the US President is allowed to do under US law is impose unilateral sanctions that nullify the use of US financial institutions for international trade with Iran," he said.

Paul Musgrave, associate professor of government at Georgetown University in Qatar, said it would be "very difficult" for Trump to enforce "economic consequences" on countries trading with Iran. "Trump is trying to unilaterally assert a type of coordinated sanctions that traditionally require multilateral coordination, meaning the participation of China, Russia, and the P5 countries of the Security Council," he said.

Al Jazeera's Mike Hanna in Washington said Trump's latest move shows "a degree of frustration" at the current impasse in the five-month conflict. "The statement may look like another threat to Iranian officials. But perhaps the audience he is targeting is the American public, which remains opposed to the ongoing conflict. He is taking a tough stance that he hopes will be perceived as such in the public forum, despite the fact that we have no specific details to assess the possible effectiveness of this move."

What can Iran do?

Kazem Gharibabadi, Iran's Deputy Foreign Minister for legal and international affairs, wrote on X: "They are forced to create a bigger failure for themselves each time to cover up. Military war has not worked, so now they call the next failure 'economic war.'"

Ali Vaez, deputy director of the Middle East and North Africa program at the International Crisis Group, said that if economic pressure worsens on Iran, the country could use force to break the US naval blockade. "Trump believes economic war is an alternative to war. It is a prelude to war," he said. Hassan Barari, professor of international relations at the University of Jordan, said US power over Iran has limits: "We cannot underestimate the importance and danger of the US move for the Iranian people, nor can we underestimate the desire of Iranians to at least achieve a strategic position on par with the US."

Iran is also seeking to expand international cooperation. Last week, Iran's central bank governor announced that the country would join the BRICS New Development Bank. Joining the bank would help Iran open its economy to more international sources of finance. BRICS is a group of major emerging economies including Brazil, Russia, India, China, South Africa, and has expanded to include Iran, Egypt, Ethiopia, Saudi Arabia, the UAE, and Indonesia. However, the alliance has so far failed to issue a joint statement on the US war with Iran due to internal divisions.

In addition, Iran is strengthening bilateral agreements with countries like Tajikistan. On August 15, Tajikistan and Iran finalized an agreement allowing Tehran to export oil to Dushanbe.