Global economic fallout? Experts weigh US tariff impact on Iraq
Shafaq News/ Experts are divided on the impact of the US tariffs imposed by President Donald Trump, with some suggesting significant global economic disruptions, while others downplay the direct consequences for Iraq.
Speaking to Shafaq News, economic expert Abdul Rahman Al-Mashhadani warned that both Iraq and the United States would suffer from the tariffs. He explained that the new duties could trigger a global economic slowdown, leading to a drop in global oil demand and, consequently, lower oil prices. Since oil imports account for 95% of Iraq’s budget, Iraq would be significantly impacted by these price fluctuations.
“Iraq’s exports to the United States are limited to oil, ranging between 250,000 and 450,000 barrels per day. Imposing tariffs on Iraqi oil would raise prices for refined oil products in the US market, which could reduce demand if the US is able to secure oil from other countries at more favorable prices,” he said.
Meanwhile, economist Nabil Al-Marsoumi downplayed the direct impact of the tariffs on Iraq's oil revenues. “while Trump has levied tariffs on various imported goods, ranging from 10% to 48%, oil, gas, and refined products are exempt from these duties.”
Al-Marsoumi also noted that the tariffs on Iraqi exports to the US, which are set at 39%, will have minimal impact due to Iraq’s limited export volume to the US. However, he acknowledged that the broader global effects of the tariffs could harm international trade and economic growth, reducing global demand for oil and exerting downward pressure on crude prices.
“Crude oil prices have already fallen by $2 in response to the tariffs…the full impact on global oil prices will become more apparent in the coming days.”
The tariffs, aimed at raising the cost of imported goods in the US to protect domestic industries and provide government revenue, have already prompted retaliatory measures from other nations, which have imposed tariffs on US exports.
DINAR UPDATE: The Iraqi Dinar Price Will Jump When Iraq Does This To The IQD
Chapter Summary: The Potential of the Iraqi Dinar
Introduction
The Iraqi dinar is a currency of significant interest due to its potential for appreciation against the US dollar, driven largely by the economic and political strategies employed by the Iraqi Central Bank and government.
The Iraqi dinar (IQD) has recently been gaining value, reaching its highest level in nine months against the dollar.
The significance of this development lies not only in the currency’s appreciation but also in the broader implications for Iraq’s economy.
A critical move by the Iraqi authorities—abandoning the use of the US dollar in transactions—could catalyze a flood of international investments.
This chapter will delve into key concepts surrounding currency valuation, the impact of historical geopolitical actions, and the potential pathways for value appreciation.
The Current State of the Iraqi Dinar
The recent spike in the value of the Iraqi dinar
against the US dollar has garnered attention, with its exchange rate improving from approximately 1470 IQD to 1450 IQD.
The Central Bank of Iraq has announced that most transactions will now operate solely in dinars, marking a significant policy shift.
Historical context is crucial, as the dinar was once valued significantly higher than the dollar—approximately three to four times—prior to geopolitical conflicts.
The Economic Implications of Currency Policy Change
To achieve a dramatic increase in the dinar’s value, the Iraqi government must stop accepting the US dollar for transactions.
This abandonment of USD would encourage foreign buyers to purchase dinars for transactions involving Iraq’s abundant natural resources, particularly oil.
The speaker argues that such a policy would create an artificial demand for the dinar, potentially resulting in an exponential rise in value.
Political and Historical Context
The speaker reflects on the post-war period in Iraq, emphasizing that the US government’s intervention led to a depreciation of the dinar.
Historical relationships between currency values and geopolitical changes suggest that re-establishing the dinar’s worth hinges on Iraq’s shifting away from dollar dependence.
The commentary implies a level of frustration regarding external influences on Iraq’s currency policy and economic strategy.
The Landscape of Currency Investment
The speaker shares personal investment experiences, having held dinar since 2012, with the outlook that its value will eventually rise.
Caution is advised against concentrating too heavily on one investment, advocating instead for diversification across various asset classes.
Cryptocurrency and real estate investments, particularly through tax liens, are highlighted as alternative means to optimize growth in assets.
Real-World Examples and Strategies
A significant part of the economic landscape involves the emerging trend of investing in tax liens, where investors can earn substantial returns (between 18% to 36%).
The process of leveraging real estate through tax liens is presented as a highly accessible and government-backed investment option—potentially as low as $200 to start.
Throughout the discourse, the speaker appears to emphasize the need for individuals to employ savvy financial strategies to increase their wealth rather than relying solely on the appreciation of a singular asset.
Diverging Perspectives on Future Value
Despite visible optimism regarding future appreciation of the dinar, the speaker acknowledges skepticism surrounding heavily promoted investment opportunities.
There is a notable emphasis on cautious optimism; many have been misled by “fake gurus” in the financial realm.
The speaker expresses confidence that if the Iraqi government effectively alters its economic strategy, the dinar could eventually be valued at between $1 to $3for one dinar—a considerable shift.
Conclusion
The potential for the Iraqi dinar to rise significantly hinges on strategic economic reforms by Iraq’s government, particularly regarding the use of currency in international trade. This shift not only holds promise for enhancing Iraq’s national currency value but also offers noteworthy implications for global oil pricing and financial markets. The commentary encourages viewers to cultivate a diversified investment strategy and remain vigilant against misleading financial promises. As Iraq stands at a crossroads, the implications of these financial decisions could reshape the nation’s economy and the future of its currency in a rapidly changing world.
Key Insights
The dinar is showing signs of strength relative to the dollar.
Full abandonment of the dollar in local transactions could lead to increased value of the dinar.
Historical context plays a pivotal role in understanding the current and future currency valuation.
Investments should be diversified to mitigate risks associated with market volatility.
The transition to a more self-sufficient economy by leveraging national resources could enhance the dinar’s worth.
Further Considerations
Stakeholders should monitor the Iraqi government’s currency policies closely for emerging opportunities.
Educational resources on diversified investment options can enhance personal financial growth and resilience in the face of uncertainty.
In summary, the future of the Iraqi dinar appears to hinge on a delicate interplay of geopolitical determination, national policies, and the global economic environment. A strategic pivot by the Iraqi leadership could lead to profound implications, not only for domestic prosperity but also for international economic dynamics.
The Iraqi banking sector has witnessed significant changes in its financial indicators during the past year, according to the issued data, which reflect the performance of commercial banks, the movement of cash, and the purchases and sales of the dollar, in addition to the policies of the Central Bank.
Commercial banks: decline in some assets and growth in private deposits
The data showed a decline in the assets of commercial banks by 0.92%, falling from 205.25 trillion dinars by the end of 2023 to 203.36 trillion dinars at the end of 2024. Current deposits also recorded a decrease of 9.38%, while private deposits increased by 10.63%, indicating increased trust of individuals in private banks compared to traditional current deposits.
Dollar movements: a sharp decline in central bank purchases
The Central Bank’s purchases of the dollar recorded a significant decline of 61.97%, falling from $8.35 billion to $3.18 billion. In contrast, dollar cash sales saw a slight decline of 0.92%, reflecting a decline in demand for hard currency within local markets.
Currency: decrease in the money supply and decline in the reserves of the issued currency
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The issued currency recorded a decrease of 1.36%, while cash outside banks decreased by 10.26% to reach 130.35 trillion dinars compared to 145.26 trillion dinars in the previous year. The ratio of mandatory reserves to the issued currency also decreased from 143.14% to 129.64%, indicating a reduction in cash availability in the market.
Central Bank: A rise in loans and a decrease in gold reserves
Loans granted to small and medium-sized enterprises witnessed a significant increase of 47.02%, reflecting a trend to support economic development through project financing. In contrast, gold reserves recorded a decline of 8.69% to reach 189.90 trillion dinars compared to 207.96 trillion dinars last year.
Inflation and the exchange rate: a marked decline
The inflation rate recorded a decline of 35.56%, falling from 4.50% to 2.90%, reflecting an improvement in price stability. The exchange rate in the parallel market also fell by 1.32%, in an indication of relative stability in the value of the dinar against the dollar
In the face of the tight trade policies adopted by the administration of US President Donald Trump, Iraq took a calm stance, and reduced the direct economic impact of the decision to raise tariffs by 39% on its exports to the United States.
The economic adviser to Prime Minister Mazhar Mohamed Saleh said in a press statement that: “American tariffs, if they really impose on our country’s trade with it, do not constitute any impediment on the trade and economic stability of Iraq.”
He explained that “Iraqi exports to the US market do not exceed 5 billion dollars annually, mostly from crude oil, while the US market is secondary compared to major markets such as China and India, which import about 70% of Iraqi oil production.”
Saleh pointed out that “this restorative trend from Baghdad reflects a realistic reading of the balances of foreign trade, as Iraq relies in its imports by 90% on partners such as Turkey, China, India, the UAE, and European Union countries.
On the other hand, the United States does not represent a key partner, whether in terms of import or export.”
Despite the confident tone, Saleh expressed some concern about the general course of US trade policy, saying, “We hope that Iraq will be free from these protectionist shifts, especially as it is linked to Washington with the Strategic Framework Agreement signed in 2008, which regulates bilateral relations in the fields of security, commercial and economic cooperation.”