Why Trump's 'secondary tariffs' threat on Russia negatively impacts India
What's the story
United States President Donald Trump has threatened to impose 100% secondary tariffs on countries trading with Russia. The move is aimed at India, China, Brazil, Turkey, Vietnam, and the United Arab Emirates. The tariffs, Trump warned, would be imposed if Russia doesn't stop its military actions in Ukraine within 50 days. This secondary tariffs could disrupt India's oil imports from Russia and jeopardize its trade agreement with the US.
Oil dependence
India imports 1.6-1.7 million barrels of Russian oil daily
India currently imports 1.6-1.7 million barrels of Russian oil daily, meeting around 35% of its crude needs. The imports have increased due to steep discounts offered by Russia since the Ukraine war started. India is also the main buyer of its flagship Urals oil. Trump's secondary tariffs would target goods imported into the US from countries with significant trade ties with Russia, especially in the energy and defense sectors.
Trade agreement
India-US trade agreement negotiations
The threat of secondary tariffs comes as India and the US are close to finalizing a bilateral trade agreement. However, several issues remain unresolved, including market access for genetically modified crops and regulatory barriers to Indian pharmaceutical exports. Indian officials are working hard to finalize these negotiations due to the potential impact of the secondary tariffs, which could bring India back under tariff scrutiny if unmet.
Endorsement
Trump's tariff strategy backed by Rutte, Tillis
Trump's tariff strategy has been backed by NATO chief Mark Rutte and US Republican Senator Thom Tillis. Rutte warned countries like India to take the threat seriously, while Tillis expressed concern that the 50-day deadline might allow Russia to escalate its military actions further. At the same time, a new bipartisan legislation in the Senate could also authorize tariffs up to 500% on countries buying Russian uranium, oil, or gas.
Market reaction
Russia dismisses Trump's ultimatum
Despite the threat of secondary tariffs, Russia has dismissed Trump's ultimatum as "unacceptable." However, Russian markets reacted positively to Trump's announcement with a 2.7% rise in the stock exchange and an appreciation of the ruble against the US dollar. Analysts believe this could be due to expectations of a possible diplomatic resolution within the given timeframe or Russia's ability to withstand sanctions through alternative trade channels.