US-China Trade War Escalates, Iran Sanctions Return, Gaza Burns and Haiti Erupts in Fuel Riots

Jamaica Homes Global Conflict & Caribbean Impact Review | Published 3 October 2018 | Reporting Period: 3 July – 2 October 2018

Quarterly Briefing

• The US-China trade war intensifies dramatically: tariffs take effect on $34 billion of Chinese goods in July and a further $200 billion in September, covering nearly half of all Chinese exports to the United States.
• The United States reimposed nuclear-related sanctions on Iran in August after withdrawing from the JCPOA in May; oil markets tightened as Iranian crude exports fell in anticipation of November’s broader energy sanctions.
• Gaza’s Great March of Return protests continued through the quarter; Israeli security forces killed over 180 Palestinians since the marches began in March.
• Violent fuel subsidy protests erupt in Haiti in July, forcing the government to cancel a planned fuel price increase; the episode reveals the depth of popular frustration with governance and economic management.
• Hurricane Florence strikes the Carolinas as a major Category 1 hurricane on September 14, producing catastrophic flooding and demonstrating the season’s ongoing severity.
• Breaking as this edition publishes: Saudi journalist Jamal Khashoggi entered the Saudi consulate in Istanbul on October 2 and has not emerged; Saudi Arabia denies he was harmed.

Prologue: Trade Wars and Energy Shocks

The third quarter of 2018 placed trade policy at the centre of global economic risk for the first time in a generation. The United States pursued tariff escalation against China with a scale and determination that markets had initially doubted, demonstrating that the Trump administration’s instinct for disruption extended to the foundational architecture of post-war international trade. Simultaneously, the reimposition of Iran sanctions was tightening global oil supplies and driving Brent crude toward $85 per barrel — its highest level in four years and a level that had real consequences for Caribbean fuel import bills. Close to home, Haiti’s fuel riot crisis served as a reminder that the Caribbean’s neighbourhood has its own sources of volatility capable of affecting Jamaica’s stability and tourism patterns. The quarter closed with the unfolding mystery of a missing journalist in Istanbul that will define the months ahead.

The US-China Trade War

The first tranche of US tariffs — 25 per cent duties on $34 billion of Chinese goods — took effect on 6 July, with China immediately retaliating with equivalent measures on American agricultural exports including soybeans. A second tranche of tariffs on $16 billion followed in August. In September, the Trump administration escalated significantly: 10 per cent tariffs (rising to 25 per cent in January) on a further $200 billion of Chinese goods were imposed, bringing the total under tariff to approximately $250 billion. China announced retaliatory duties on $60 billion of US goods. The two countries were engaged in the largest trade confrontation since the 1930s.

For Jamaica and the Caribbean, the US-China trade war’s primary risk was through the global economic channel: a sustained tariff war threatened to slow world trade, reduce growth in both the US and China, and weaken the global economy on which Caribbean tourism and remittance income ultimately depended. The specific sectors under tariff — industrial goods, machinery, agricultural products — were not primary Caribbean concerns in themselves, but the macro-level consequences of a prolonged confrontation could eventually affect US consumer spending on travel and diaspora members’ capacity to send money home.

Iran Sanctions and Rising Oil Prices

The United States’ withdrawal from the Iran nuclear deal in May 2018 began to affect oil markets in practical terms as the summer progressed. The first tranche of reimposed sanctions, targeting trade in goods, metals and automotive transactions, took effect in August. The more consequential second tranche, targeting Iranian oil exports, was scheduled for November 4. In anticipation, Iranian crude exports began to fall as buyers in Europe, Asia and elsewhere sought alternative sources rather than risk US secondary sanctions. Brent crude rose from approximately $75 per barrel at the start of July to above $85 by early October, approaching levels not seen since 2014.

For Jamaica and the Caribbean, higher oil prices over an extended period have a direct and material impact on fuel import costs, electricity generation expenses and the broader inflation environment. At $85 per barrel, the pressure on Jamaica’s current account and foreign exchange reserves was real. The reduction in PETROCARIBE’s remaining operational capacity — as Venezuela’s own output continued to fall under the weight of economic mismanagement and US sanctions — meant that Caribbean nations now faced these higher prices without the preferential arrangements that had cushioned them in previous cycles.

Haiti’s Fuel Crisis

In July 2018, the Haitian government announced plans to increase fuel prices by up to 50 per cent as part of an agreement with the International Monetary Fund to reduce subsidies and rationalise public finances. The announcement triggered immediate and violent protests across the country: roads were blocked, buildings were burned, and several deaths were reported. The government reversed the decision within hours. The episode revealed several things simultaneously: the fragility of Haiti’s political and social order, the severity of popular economic grievances after years of governance failure and the Petrocaribe corruption scandal, and the degree to which global oil price movements — the rise in crude prices that made subsidy maintenance increasingly costly — translate directly into Caribbean political instability.

For Jamaica, Haiti’s July crisis was a reminder that instability in the Caribbean’s nearest neighbour can have regional consequences. CARICOM expressed concern about Haiti’s trajectory. The security implications for investment in northern Haiti and for broader regional trade patterns were under review. Prime Minister Andrew Holness had been engaged in CARICOM-level discussions about Haiti, and Jamaica’s role in supporting stability in the wider Caribbean remained an ongoing diplomatic priority.

Gaza and the Continuing Conflict

The Great March of Return protests along Gaza’s border with Israel, which began on 30 March 2018, continued through the entire quarter. Weekly demonstrations saw tens of thousands of Palestinians gather at the fence; Israeli security forces used live fire against those who approached or attempted to breach the barrier. By September, the total Palestinian death toll from the protests since March had exceeded 180. International calls for independent investigations into the use of force multiplied, though no formal international mechanism emerged. The underlying issues — Gaza’s eleven-year blockade, its 50 per cent youth unemployment rate and the absence of any political horizon — remained unaddressed.

The Breaking Story from Istanbul

As this edition is published on 3 October, news is emerging of a troubling development: Jamal Khashoggi, a Saudi journalist and Washington Post columnist who had been living in self-imposed exile in the United States and who had written critically of Crown Prince Mohammed bin Salman, entered the Saudi consulate in Istanbul on 2 October to collect paperwork. He has not re-emerged. His fiancée waited outside. Saudi Arabia denies he was harmed and claims he left the consulate. Turkish authorities are investigating. The full circumstances of what happened inside that building are not yet known, but the episode is already generating intense international attention. Its implications — for Saudi Arabia’s international standing, for press freedom and for the Gulf’s relationships with Western partners — will become clearer in the coming days.

Looking Ahead

The US-China trade confrontation is the dominant macro risk entering the final quarter: markets are absorbing the current tariffs, but the threatened escalation to 25 per cent in January represents a further step whose full economic consequences have not yet been felt. Iran’s oil exports will continue to fall as November’s sanctions take effect, maintaining upward pressure on energy prices that Caribbean importers will feel directly. The Istanbul story’s unfolding will test Saudi Arabia’s relationships with Western partners. And Haiti enters its own political process with the instability of July’s fuel protests unresolved. Jamaica heads into the final quarter with its tourism sector continuing to outperform and its fiscal programme on track, but the global headwinds are not diminishing.

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Jamaica Homes Global Conflict & Caribbean Impact Review is published quarterly, examining how wars, geopolitical tensions and major international crises have shaped Jamaica, the Caribbean and their economies.

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