In July 2025, President Donald Trump issued a flurry of tariff threats to 14 countries—including long-standing allies such as Japan and South Korea—demanding new trade deals or facing levies of up to 40%. Days later, the list grew to include hydrocarbon exporters Libya, Algeria, and Iraq, despite their modest trade profiles with the United States. On 31 July, the White House announced the final – for now – tariff rates, and Iraq was hit with a 35% rate, up from the 30% announced in Trump’s early July letter to Iraq’s prime minister, Mohammed Shia’ Al-Sudani.
At first glance, Iraq seems an unlikely target. According to the U.S. Trade Representative, in 2024, U.S. goods exports to Iraq were $1.7 billion, and imports from Iraq (comprising crude and refined oil) were $7.5 billion, for a U.S. goods trade deficit of $5.9 billion. The U.S., in turn, exported industrial machinery, vehicles, medical equipment, agricultural products, and pharmaceuticals to Iraq—key inputs for a country still navigating post-conflict recovery.
In 2024, U.S. services exports to Iraq were $2.2 billion, and services imports from Iraq $532 million, for a services trade surplus of $1.7 billion.
Obviously, Iraq is no economic rival to the U.S. It is a nation grappling with the long shadow of war, sanctions, and corruption, what the Brookings Institution called the “forgotten legacy of the Iraq invasion.”
Given that the U.S. invasion of Iraq, based on erroneous information, the mis-managed post-invasion reconstruction, and the dash for the exits in 2011, contributed to the parlous situation in Iraq today, why hit Baghdad with tariffs?
There’s little evidence that this move is grounded in economic logic. Instead, it appears politically motivated. Trump may be seeking to:
- Pressure Iraq to join the Abraham Accords and normalize relations with Israel, even though Iraq’s Parliament outlawed normalization in 2022.
- Reorient Iraq away from China, Iraq’s top trade partner, and so reduce Chinese influence.
- Align Iraq with U.S.-led blocs. Iraq is a “dialogue partner” (potential member) of the Shanghai Cooperation Organization, and it isn’t a member of BRICS, though the Trump tariffs may make it reconsider.
- Reduce Iranian influence by targeting institutions like the Popular Mobilization Forces (PMF), which some U.S. lawmakers have sought to sanction, and alleged supporters of Iran in the legislature, the oil and finance ministries, and the banking sector.
- Discourage efforts like the Iran-Iraq “joint security memorandum of understanding” that was the topic of Prime Minister Al-Sudani’s recent meeting with an official of Iran’s Supreme National Security Council.
- Support a particular Iraqi political figure, much as he is using Brazil’s 50% tariff to stop the “witch hunt” prosecution of former president (and Trump ally), Jair Bolsonaro.
- Strengthen Washington’s proxies in Iraqi Kurdistan who can offer a platform (or manpower) for moves against Iran or Syria.
- Set a precedent for similar steps towards Turkey, a NATO ally, and other U.S. friends in the region, such as the United Arab Emirates, Jordan, Kuwait, Pakistan, Qatar, and Saudi Arabia.
- Shore up support from his domestic base by claiming America as being “taken advantage of” - regardless of the facts.
These strategies are not new - but they are risky.
Most concerning is the timing. Iraq is headed for national elections in November. Prime Minister Al-Sudani’s complicated electoral alliance includes the head of the PMF, so American actions against the PMF and Iraq’s economy can be interpreted as a ploy to weaken Sudani.
Al-Sudani, who met with President Joe Biden in April 2024, has prioritized restoring trust in Iraq’s institutions while seeking to elevate the U.S.-Iraq relationship beyond security cooperation. Sudani wants to see economic investment, education exchange, and private-sector development play a bigger role in bilateral ties.
Instead of reinforcing that vision, Trump’s actions signal a different approach—transactional, impatient, and insensitive to domestic Iraqi dynamics. These types of messages risk alienating moderates, empowering hardliners, and casting doubt on America’s reliability as a long-term partner.
Then there is the matter of diplomatic presence. Currently, there is no confirmed U.S. ambassador in Baghdad. The post has been vacant since December 2024 and is filled by a chargé d’affaires, who is also the U.S. ambassador to Yemen, where things are apparently pretty quiet. That absence sends the wrong signal at the wrong time.
Rather than imposing economic penalties on one of America’s most strategically significant partners in the Middle East, now is the time for a different kind of diplomacy—one built on mutual respect, shared goals, and a clear-eyed understanding of regional complexity.
Iraq deserves not threats but a serious conversation about trade, development, education, energy cooperation, and how two countries with a turbulent past can shape a more stable future. In a region riddled with flashpoints, Iraq remains one of the few places where American diplomacy can still matter - if Washington invests in it wisely.
Al-Sudani said the U.S. and Iraq will meet by the end of 2025 to “arrange the bilateral security relationship” between the two countries, and to renew his push for a broader economic relationship between the countries. A meeting with Trump is an opportunity for Al-Sudani to highlight that Iraqi government security operations are limiting conflict across the region by thwarting twenty-nine attempted drone and missile attacks on Israel by local militias, and, most recently, an Islamic State plot to target Shia pilgrims in the holy city of Karbala.
The coming months are a test. Not just for Iraq, but also for the United States. The question is not whether America can use tariffs to coerce weaker partners – it can - but whether it can lead by example when it matters most.
James Durso (@james_durso) is a regular commentator on foreign policy and national security matters. Mr. Durso served in the U.S. Navy for 20 years and has worked in Kuwait, Saudi Arabia, and Iraq.
