Trump’s Victory Has Surprising Impact on Iran’s Economy

Donald Trump’s election victory sends Iran’s currency plummeting to historic lows, signaling potential economic turmoil ahead.

At a Glance

Iran’s rial hit an all-time low of 703,000 to 1 USD following Trump’s election win.
Currency drop reflects fears of potential new economic sanctions from Trump.
Trump’s previous presidency saw severe sanctions on Iran as part of a “maximum pressure” campaign.
Iran’s economy already struggles under international sanctions due to its nuclear program.
The election outcome could significantly impact Iran’s economic stability and diplomatic relations.

Trump’s Victory Triggers Iranian Currency Crisis

The Iranian economy experienced immediate tremors following Donald Trump’s victory in the U.S. presidential election. Iran’s national currency, the rial, plunged to an unprecedented low against the U.S. dollar, trading at 703,000 to 1 USD before settling at 696,150 to 1 USD. This dramatic depreciation reflects growing fears among Iranian investors and citizens about the potential reimposition of harsh economic sanctions under a second Trump administration.

The currency’s freefall is largely attributed to the anticipation of a more hardline U.S. stance towards Iran, reminiscent of Trump’s previous “maximum pressure” campaign. During his first term, Trump withdrew from the Iran nuclear deal and imposed severe sanctions that crippled Iran’s economy. The prospect of renewed sanctions has destabilized Tehran’s markets, forcing policymakers to brace for a potentially turbulent future.

Stocks, bond yields and bitcoin surged as the U.S. election brought Republican gains and Donald Trump closed in on 270 electoral votes.

Iran's currency, the rial, fell to an all-time low, as its economy struggles under international sanctions. https://t.co/6vkp0ib46Q

— The Associated Press (@AP) November 6, 2024

Economic Vulnerabilities Exposed

Iran’s economy has been struggling under international sanctions due to its nuclear program and involvement in regional conflicts. The country supports groups like Hamas, Hezbollah, and the Houthis, which has further strained its relationships with Western powers. The rial’s depreciation signals broader economic vulnerabilities, highlighting the precariousness of Iran’s fiscal condition.

“The election of the U.S. president has nothing to do with us. The general policies of the U.S. and Iran are constant.” – Iran’s foreign ministry

Despite Iran’s official stance downplaying the impact of the U.S. election, the markets tell a different story. The rial’s plunge reflects deep-seated concerns about the future of Iran’s economy under potential renewed U.S. pressure. This economic instability could have far-reaching consequences for the Iranian people, who have already endured significant hardships due to previous sanctions.

Potential Consequences of Renewed Sanctions

If Trump follows through on campaign promises to reinstate tough sanctions on Iran, the consequences could be severe. During his previous term, sanctions led to a deep recession in Iran, with GDP contracting by 4.8% in 2018 and forecasted to shrink by another 9.5% in 2019. Unemployment rose from 14.5% to 16.8%, and inflation soared to 30.5% in 2018, with projections of reaching 35.7% in 2019.

Oil exports, a major revenue source for Iran, plummeted from 2.3 million barrels per day in early 2018 to 260,000 barrels per day by October 2019 under previous sanctions. The reinstatement of such measures could once again devastate Iran’s oil industry and overall economic stability. Moreover, the Iranian people could face further hardships as shortages of imported goods become more acute and living standards continue to decline.

Iran’s Economic Resilience and Future Prospects

Despite the gloomy outlook, Iran has shown some resilience in the face of economic pressure. The concept of a “resistance economy” aims to reduce dependence on oil and withstand external pressures. Some sectors, such as manufacturing, have improved due to currency devaluation and reduced imports. However, the sustainability of this approach remains questionable, especially if faced with renewed international isolation.

As Iran grapples with the potential economic fallout from Trump’s victory, the country faces the daunting task of balancing its political ambitions with economic realities. The coming months will be crucial in determining whether Iran can navigate these choppy waters and mitigate the impact of potential new sanctions, or if it will face another period of severe economic distress.