Tariffs as Secondary Sanctions
The United States’ Proposed Iran Trade Penalty and the Collapsing Boundary Between Trade and Coercion
On 12 January 2026 President Trump announced that any country “doing business with the Islamic Republic of Iran” would face a 25 per cent tariff on all trade with the United States, effective immediately. No executive order, regulation, or administrative guidance accompanied the statement. If carried into effect as articulated, the measure would represent a decisive departure from established practice: tariffs would cease to function primarily as instruments of trade policy and would instead be deployed as mechanisms of extraterritorial coercion aimed at the commercial choices of third states.
This is not a routine extension of Iran sanctions. Primary sanctions prohibit dealings by US persons. Secondary sanctions threaten designated foreign actors with exclusion from US finance or markets. What is proposed here is categorically different. It contemplates a uniform customs duty imposed at the US border on imports from any country maintaining commercial relations with Iran, irrespective of whether the imported goods themselves bear any Iranian nexus. The enforcement point is no longer licensing or designation, but market access itself.
Even if the proposal never crystallises into an operative regime, its significance lies in what it reveals. Trade access is now being framed openly as a tool of geopolitical alignment. The boundary between trade regulation and security compellence, long strained in practice, is no longer even rhetorically observed.
The domestic foundation: authority under strain
The threshold legal question is elementary and unavoidable: by what statutory authority could such a tariff lawfully be imposed?
The most expedient route, and the one most likely to be relied upon, is the International Emergency Economic Powers Act (IEEPA). Yet recent judicial developments have rendered that path increasingly unstable. Federal courts have already held that certain tariff measures imposed under IEEPA in 2025 exceeded presidential authority. The Federal Circuit has affirmed that IEEPA does not confer a general or open-ended power to levy customs duties, drawing a sharp distinction between emergency regulation of transactions and the imposition of taxes at the border.
The breadth of the proposed Iran measure compounds this vulnerability. A penalty applied to all imports from a country on account of undefined “business with Iran” is precisely the sort of action that engages the major questions doctrine. Measures of profound economic and diplomatic consequence demand clear congressional authorisation. Emergency proclamation cannot substitute for statutory clarity.
US tariff law regulates goods. Sanctions law regulates conduct. The proposal attempts to collapse that distinction by using tariffs to punish foreign commercial behaviour unrelated to the imported product itself. That conceptual mismatch is not incidental; it is the core legal weakness.
The Supreme Court’s pending review of IEEPA-based tariffs therefore casts a long shadow. Whatever residual discretion the Court may leave for emergency economic measures, it is unlikely to sanction a regime that lacks administrable standards. Customs authorities classify goods, determine origin, and assess value. They do not conduct geopolitical audits of exporting states.
Alternative tariff statutes offer little refuge. Trade remedies and national security provisions are tethered to findings concerning goods, injury, or specific practices. None contemplates a blanket penalty imposed on third states for their foreign commercial relations. What is proposed is, in substance, an attempt to repurpose tariff machinery for sanctions enforcement — a transposition domestic courts are increasingly unwilling to indulge.
Administrative law: the absence of machinery
Even a tariff imposed pursuant to valid statutory authority must be capable of orderly administration. Here, there is no machinery at all. The announcement supplies no definitions, no scope, no implementing authority, and no procedures.
A viable regime would require, at minimum, a published instrument identifying the statutory basis; a workable definition of what constitutes “doing business with Iran”; clarity as to whether liability attaches on a country-wide or firm-specific basis; and mechanisms for licensing, evidentiary determination, and appeal.
Absent such features, the measure is exposed to challenge as arbitrary and capricious. From an administrative law perspective, challengers need not contest the foreign policy objective. It is sufficient to demonstrate that the executive has created a duty-liability scheme devoid of intelligible principles.
WTO law: MFN, tariff bindings, and the security exception
From an international trade law perspective, the proposal collides directly with foundational WTO obligations. A duty imposed on imports by reason of the exporting country’s relations with Iran discriminates between like products on the basis of origin and exceeds bound tariff commitments. Prima facie inconsistency with Articles I and II of the General Agreement on Tariffs and Trade is difficult to avoid.
The only plausible defence would lie in the national security exception under Article XXI. Yet that exception is not a blank cheque. WTO jurisprudence has confirmed that invocations of Article XXI are reviewable, albeit subject to deference in assessing a member’s articulation of its essential security interests.
Each expansion of the security exception weakens the assumption that trade rules constrain power. Once tariffs become routine instruments of geopolitical alignment, the WTO ceases to function as a legal system and reverts to a managed sphere of tolerated retaliation.
The structural difficulty is acute. The measure does not target Iran or Iranian goods; it seeks to compel third states. The nexus between punishing unrelated exporters and the protection of essential security interests is attenuated. The wider and more indiscriminate the coercive sweep, the harder it is to sustain claims of necessity.
Extraterritoriality and countermeasures
Public international law does not prohibit economic pressure as such. States routinely use trade leverage. Extraterritorial application, however, remains a point of persistent contest, particularly where a state penalises conduct wholly outside its territory.
The European Union’s blocking statute was crafted precisely to shield EU operators from the extraterritorial reach of US sanctions regimes. A border-enforced demand for geopolitical alignment would sit squarely within the category of measures that such countermeasures were designed to resist.
Enforcement reality
The most profound practical objection is also the most legally damaging. Customs administration is not equipped to determine whether an exporting country is “doing business with Iran” in a manner triggering universal liability.
A country-wide tariff would inevitably sweep in exporters with no Iranian nexus whatsoever. A firm-specific approach would transform the measure into a de facto sanctions designation regime masquerading as a tariff, raising acute due process concerns.
Operational impossibility is not a footnote. It marks the boundary between rhetorical compulsion and sustainable legal policy.
Conclusion
The announcement signals a willingness in Washington to deploy trade access as an instrument of alignment enforcement. It does not yet establish a durable legal regime. Statutory authority is uncertain, judicial headwinds are strong, administrative machinery is absent, WTO compatibility is doubtful, and enforcement realities are unforgiving.
Until a formal executive instrument identifies a clear legal basis and implementing regulations supply workable standards, the proposal remains what it presently appears to be: an attempt to open a new coercive frontier rather than a governed extension of existing law.
The law notices the difference.
