Mac Margolis

Back in March, President Trump imposed the same 25% secondary tariff on countries purchasing Venezuelan oil. The tariff was impracticable and was never actually put into effect. The Venezuelan executive order, in fact, delegated the determination of which countries to impose a tariff on to the Secretary of State. China, however, continued buying Venezuelan oil, and Secretary Rubio never made the determination necessary to impose a 25% tariff on China. Taxing the trade of countries that do business with Iran or Venezuela attempts to extend the concept of secondary sanctions—that is, imposing sanctions on a foreign firm that does business with a sanctioned entity—to the level of countries. But that effectively means penalizing huge levels of trade without a clear threshold as to what levels of purchases would trigger it. It also assumes that a country has control over the foreign trade of its firms and individuals, which is generally not the case. As a result, the punishment—taxing all of a nation’s trade—is so disproportionate to the activity that it seeks to restrict, namely any purchase by someone in that country from Iran, that it makes little sense to impose it in practice. Most likely, the 25% tariff on countries trading with Iran will meet the same fate as the one imposed on Venezuela: it will never be implemented.