While it remains too early to predict with any certainty, both allies and adversaries alike are anxiously scanning statements from the campaign and Trump’s past for any clues as to the policy directions his administration is likely to take. In this update, we offer our initial expectations regarding the impact a Trump Presidency will have on economic sanctions and export controls.
During the presidential campaign, Trump extensively criticized President Obama’s policies with respect to Iran, Russia, and Cuba – all policies in which the imposition or the easing of sanctions have played a key part. Though it is uncertain whether Trump will pull back on any of the current Administration’s policies, as a legal matter he likely would have that capacity: in each case President Obama has largely relied on Executive Authority, and what can be done under President Obama can be undone under President Trump.
The critical question is to what extent Trump will choose to undo President Obama’s actions. In our early assessment, we believe Trump is likely to quickly alter Iran sanctions, less likely to materially alter Russia sanctions, and least likely to roll back the easing of Cuba sanctions.
Iran: Given Trump’s campaign statements and the existence of more than two dozen Iran sanctions bills percolating in Congress, we judge it highly likely that Trump will move quickly to reassess – if not turn back – some aspects of the Iran nuclear deal. Trump can either take the lead via Executive actions or allow Congress to provide him direction via legislation. Either way, the new administration will face numerous challenges if it chooses to significantly depart from the sanctions relief the Obama Administration negotiated. Absent significant Iranian noncompliance with its nuclear commitments, U.S. allies will be unlikely to go along with any return to pre-relief sanctions. Such a move would also increase instability in the Middle East – a region from which Trump has promised to further extricate the United States – and only compound the uncertainty posed by Iran’s own presidential elections in May 2017. Further, Trump would have to be willing to risk some high-paying manufacturing jobs, many of which are at least partly secured at U.S. aerospace companies via future sales to Iran that have already been authorized.
Nevertheless, we view it as likely that Trump may move to impose substantial new non-nuclear sanctions on Iran – staying true to the text of the nuclear accord, while pressuring Iran’s activities in missile development and its support of troublesome players in Syria, Yemen, and elsewhere. Depending upon what sort of individuals and enterprises are caught up in these measures, such new measures could greatly impact the current state of sanctions relief. Certain entities (including financial institutions and major companies, for example), that were delisted under the nuclear deal could be relisted under different, non-nuclear authorities.
Russia: Trump and Russian President Vladimir Putin appeared to express a mutual interest in moving away from the tensions between Washington and Moscow that emerged following Russia’s actions in Ukraine and Putin’s support for President Bashar al-Assad in Syria. While Russia sanctions did not play as large a role in the campaign as did the Iran sanctions, if Trump is sincere in his desire to re-establish a closer working relationship with Russia, President Putin has made it clear that sanctions need to be addressed. Current Russia sanctions are multifaceted and extensive, including restrictions on individuals and companies (including prominent business people and the largest banks and energy firms in the country); sanctions due to Moscow’s activities in Eastern Ukraine; a near complete embargo on Crimea; sanctions on various Russian entities for involvement in Syria; and human-rights-related sanctions under the Magnitsky Act.
During the campaign, Trump stated that he would be open to examining whether to recognize Crimea as Russian territory, which could lead to a near immediate removal of the embargo. Though he was broadly silent on other components of the sanctions, we assume that Trump will request a full review of all measures. As with Iran, Trump could face challenges – members of his own party have been very critical of President Putin’s activities; it would be difficult for Trump to forcibly annul the statutory Magnitsky Act (though he could choose to cease adding names to the list); and it is not clear whether U.S. allies in Europe and elsewhere would concur with his strategy.
Regardless, Trump will need to make an initial determination on Russia sanctions by March 2017, which is when the “national emergency” concerning Russia – which forms the basis for the sanctions regime – must be renewed.
Cuba: During the campaign, Trump spoke sparingly of Cuba. However, he did note that he would “cancel” any sanctions-relief deal if it was not to his liking and if it did not serve the people of Cuba in “protecting religious and political freedom.”
Though Trump could reverse the Executive actions underlying President Obama’s easing, we believe that Cuba policies are less likely to be altered than Iran or Russia policies. Numerous U.S. companies have begun legally operating on the island, including major U.S. hotel chains and airlines. U.S. investment and visits have increased markedly, and if he departed from President Obama’s policy, President Trump would risk likely business backlash for minimal political gains.
Though we think it unlikely that President Trump will undo President Obama’s policy choices, we assess that the pace of Cuba sanctions easing – which had seen significant rollbacks to the sanctions regime every few months for the past two years – may slow or stall, at least initially.
During the campaign, Trump made bold, broad claims on trade policy a central part of his platform. During the early days of his transition, Trump continued to vow to withdraw from the Trans-Pacific Partnership (TPP), push for renegotiation of the North American Free Trade Agreement (NAFTA), label China a currency manipulator, and instruct the Treasury Secretary to bring trade cases against China both in the United States and at the World Trade Organization (WTO).
While Trump made many such statements regarding trade policy generally, his campaign provided very little insight into how export control policy in particular may shift under his administration. Trump has advocated in favor of a less-interventionist foreign policy while also vowing to pursue a more aggressive stance with trade partners such as China and Mexico. It is still unclear how these stated policy goals will be realized in the context of export controls.
The incoming administration will likely make major changes to the leadership of the executive branch agencies overseeing export control policy and recent export control reform efforts, though the particular flavor of that change is yet to be known. We will start to get a better sense of the direction of the new administration’s policies in the coming days and weeks as Trump begins to announce relevant cabinet and senior-level appointments such as his choice for Secretary of Commerce. Even then, uncertainty will continue up to and likely beyond the inauguration on January 20, 2017.
Given the heated rhetoric during the presidential race and the major role that trade issues played in the primaries, debates, and hearts and minds of American voters, it seems certain that changes to multiple areas of international trade – including economic sanctions on Iran, Russia, and Cuba; export controls; review and approval by the Committee on Foreign Investment in the United States (CFIUS); as well as Bank Secrecy Act (BSA) reporting and anti-money laundering (AML) requirements, among others – could be felt soon after Trump takes office early next year. Nevertheless, the extent, direction, and longevity of such changes remains to be seen.
As specific appointments and policies begin to take shape over the next few months, Gibson Dunn experts will continue to monitor the developments in this area and to provide additional information and analysis in subsequent alerts.
 Carl Schreck, Explainer: How Trump Could Roll Back Obama’s Russia Policies, Radio Free Europe/Radio Liberty (Nov. 13, 2016), available at http://www.rferl.org/a/russia-us-explainer-trump-roll-back-obama-policies/28113333.html.
 Putin Signs Law Suspending U.S.-Russian Plutonium Agreement, Radio Free Europe/Radio Liberty (Oct. 31, 2016), available at http://www.rferl.org/a/russia-putin-signs-law-suspending-plutonium-agreement/28086912.html.
 Luisita Lopez Torregrosa, Voices: Trump Win Casts Shadow on U.S., Cuba Relations, NBC News (Nov. 13, 2016), available at http://www.nbcnews.com/news/latino/voices-trump-win-casts-shadow-u-s-cuba-relations-n682776.
This post comes to us from Gibson, Dunn & Crutcher LLP. It is based on the firm’s memorandum, “Trade Under Trump: How The New Administration Will Impact U.S. Economic Sanctions And Export Controls,” dated November 18, 2016, and available here.