(Not So) Fun Fact: Yesterday, Customs and Border Protection released an interim final rule that indefinitely suspends the de minimis exemption for imports valued under $800, subjecting U.S. businesses and consumers to additional fees and tariff costs.

Reflecting on the Iran Conflict: The Economic Costs

What’s Happening: On Monday, the U.S. Treasury Department authorized a 60-day license for Iran to sell its oil on the global market, upending decades of economic sanctions imposed by the United States. The move will allow Iran to produce and ship oil without relying on its so-called “shadow fleet” to evade sanctions, opening up the possibility of $8 billion U.S. dollars in new revenue for the Iranian regime between now and August 21. This comes amid ongoing peace talks between the United States and Iran that are expected to continue during the temporary ceasefire announced last week. The memorandum signed last week resulted in the end of the U.S. naval blockade of all vessels heading to and from Iranian ports as well as paves the way for reopening the Strait of Hormuz. While traffic through the strait has picked up slightly, Iran announced over the weekend that it was once again closed – sending mixed signals to the global tanker fleet. In exchange for U.S. concessions, the Trump Administration claims that Iran has agreed to allow nuclear inspectors to address the issue of the country’s nuclear program. Iran has yet to confirm these reports, or to fully commit to giving up its enriched uranium.

Why It Matters: Since the Iran conflict may be heading toward a permanent resolution, it is worth considering the economic costs over the past 100 days and where things stand now. Energy prices are steadily falling but have yet to reach their pre-war levels, which saw U.S. crude in the $60-$70 per barrel range and gas prices near $3 a gallon. Currently, U.S. crude oil is priced in the mid–to–low $70s – down roughly 25 percent in a month – and U.S. average gas prices are below $4 a gallon, which is down about 14 percent from last month. As a result of the Iran conflict, U.S. consumers paid approximately $62 billion – roughly $470 per household – in additional gasoline and diesel costs. Some of this burden may have been absorbed by U.S. businesses, but higher transportation and input costs will eventually hit consumer pocketbooks as the conflict’s reverberations are felt throughout the remainder of the year. As the Shipment covered in March, the Strait of Hormuz closure pushed the price of fertilizer up 30–40 percent; this vital agricultural input accounts for 15–25 percent of farmers’ production costs. Now, the U.S. Department of Agriculture has increased projected fertilizer cost estimates by about 9–13 percent across major crops, which will inevitably put pressure on global food prices. The conflict was a major hit to airline travel as air routes shifted and passenger prices rose 5–10 percent due to jet fuel shortages. Furthermore, the cost of global shipping has been driven markedly higher as displayed by the World Container Index – a measure of freight rates – more than doubling from $1,900 to $3,970 per 40-foot container.

According to Moody’s Analytics, the total cost for U.S. taxpayers and consumers is somewhere around $132 billion, which factors in higher energy and commodity prices, $29–$35 billion in military spending, and interest rates. This does not necessarily account for ripple effects from initial price shocks, damaged Middle Eastern infrastructure that will take months to years to repair, or the lag time to return to regular energy production and shipping. The inflationary forces and limited supply of critical goods stemming from the Iran conflict have already reduced global growth projections from both the International Monetary Fund and the World Bank. Lower economic growth will have a compounding effect that raises the overall opportunity cost of the Iran conflict as time goes on. Setting aside the strategic wins and losses that may emerge over time, if Iran is free from sanctions for the foreseeable future it will have consequences for the global energy market. First, removing sanctions would eliminate the de facto discount enjoyed by some buyers of sanctioned Iranian oil, amounting to as much as $6 a barrel in some cases. This means that countries such as China can expect higher energy prices even after the conflict is over while Iran can expect to finally sell its oil at market prices. Additionally, this move might add more oil to the global market over the long run as Iran would be able to access more customers, fully utilize its capacity, and further develop its production.

Looking Ahead: The road ahead is still shrouded in uncertainty but the long-term ramifications of the Iran conflict are undeniable. For one, normalizing Iran’s sanction-free energy exports over the short to medium term is a major shift that may have positive effects on energy prices yet negative ramifications for U.S. strategic interests. For another, perhaps the key takeaway from the conflict was the global importance of the Strait of Hormuz, as an even longer closure would have sparked a global recession. This is a lesson that can be applied to numerous other straits and canals around the world, which means these critical waterways may be at risk of future weaponization.

In Other News

A Section 301 Investigation on Germany: On June 18, the Office of the United States Trade Representative (USTR) launched a Section 301 investigation into Germany’s “Persistent Underpayment for Innovative Pharmaceutical Products.” The investigation centers on concerns that Germany’s drug pricing and reimbursement framework may unfairly shift a disproportionate share of global pharmaceutical research and development costs onto U.S. consumers and companies. USTR has argued that Germany is “fast-tracking legislation that would further reduce its spending on innovative pharmaceuticals” which will further exacerbate unreasonable and discriminatory practices that burden U.S. commerce. As part of the investigation, there will be a public hearing on September 22, and depending on the findings, the United States may implement retaliatory tariffs or trade restrictions. This investigation adds to a growing list of pending Section 301 tariffs and investigations meant to maintain President Trump’s tariff regime once Section 122 expires on July 24. Notably, Germany may also be subject to a proposed 10-percent Section 301 tariff relating to forced labor as well as a separate Section 301 investigation into structural excess capacity. As a reminder, the trade deal with the European Union (EU) is meant to cap tariff rates on most German goods at 15 percent. The combination of 301 tariffs may once again place the U.S.-EU trade deal in limbo.

What’s Going on With the Farm Bill: This week, the Farm, Food, and National Security Act of 2026 – more commonly known as the 2026 Farm Bill – moves to the Senate after passing the House. The bill covers environmental conservation, agriculture, nutrition, international food aid, and agricultural trade, to name a few. One of the most significant trade-related provisions is the continued suspension of price support programs through 2031. These programs – enacted in the 1930s – act as a buffer against falling commodity prices and protect U.S. producers exposed to global price swings. Price support programs have been repeatedly suspended and replaced with different forms of economic assistance, which requires Congress to pass a newly updated Farm Bill every few years. At the same time, the bill reauthorizes funding to expand agricultural export promotion through 2031 and requires USTR to report biennially to Congress on trade barriers impacting agricultural exports. This signals a shift to greater reliance on exports to bolster U.S. agriculture at home rather than relying heavily on permanent, government-sponsored pricing schemes. To be sure, however, this does not spell the end of the U.S. government providing U.S. farmers with monetary aid packages.

More Tit-For-Tat With China: On Monday, the Chinese Ministry of Commerce announced it is adding 10 U.S. companies to its export control list, thereby prohibiting Chinese firms from selling them any items that may have military applications. This is in direct response to the Pentagon’s June 8 update to the list of entities designated as Chinese Military Companies. While inclusion on this list does not trigger export restrictions, it does increase regulatory scrutiny, limit government procurement eligibility, and send a message to the Chinese government and any companies seeking to collaborate with those Chinese firms. Of note, the United States decided to add major Chinese technology and artificial intelligence companies such as Alibaba and Baidu. China’s export controls focus primarily on U.S. defense companies including drone manufacturers and L3Harris while also hitting the U.S. effort to establish “mineral independence.” The export controls target MP Materials and USA Rare Earth, both companies in which the Trump Administration has taken equity stakes in an effort to boost domestic extraction and refinement of critical minerals. Both of these actions show that each government is mindful of what the other is attempting to do: China is trying to develop its own artificial intelligence edge fully independent of U.S. inputs, and the United States is trying to create mineral supply chains that no longer rely on China. While adding companies to lists may appear small, it was moves similar to these that created last year’s tit-for-tat domino effect that spiraled into a full-blown trade war.