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NextImg:Trump secondary tariffs on India could have ripple effect on global oil supply - Washington Examiner

The added tariffs that President Donald Trump imposed on India to pressure it to stop purchasing Russian oil could have ripple effects on the global market. 

This week, Trump said that he was raising the tariff on goods imported from India from the previously announced 25% rate to 50% as a penalty for India’s purchases of Russian oil, which help finance Vladimir Putin’s war in Ukraine. Such secondary tariffs, placed on a third party to pressure an adversary, are an untested tool of diplomacy.

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The additional tariffs will go into effect in several weeks, which provides the two nations time to negotiate. India is the second-largest importer of Russian oil after China. Indian officials have said they would continue to import Russian crude despite Trump’s threat.

Still, if India did accede to Trump’s demand, it would raise oil prices by requiring supply to be diverted from elsewhere to India to make up for the lost barrels from Russia, which in turn would raise the price of gasoline, said Sumit Ritolia, an analyst at Kpler. 

“We are talking about 1.5 million barrels a day of crude getting removed from the system,” Ritolia told the Washington Examiner. “It will impact gasoline prices at the pump because you’re removing 1.5 million barrels of oil from the system … Overall, the prices will go up everywhere.” 

While compelling India to stop importing Russian oil would spur new exports from the Middle East, Africa, or the U.S., they would come with “higher costs, tighter availability, and logistical challenges,” Ritolia said. 

Russia could likely find alternate buyers, especially in China.

“On a global scale, such a move may not significantly cut Russian exports,” he said. “Instead, flows would likely be rerouted via indirect channels to buyers like China or through opaque intermediaries, reinforcing the two-tier oil market already in play.” 

At the start of the war, the Group of Seven nations set a price cap on Russian oil at $60 a barrel to reduce oil revenue used to finance the war while maintaining Russian supply on the market. The European Union adopted the G7’s price cap but also implemented a mechanism that allows for adjustments to the cap. The cap effectively blocks Western shippers from transporting oil sold for prices higher than the cap.

The EU said last month it would lower the cap to $47.6 per barrel, starting next month. 

India, which is not subject to the price cap, has been purchasing Russian crude at a discounted price, allowing the country to use it for domestic consumption and export the rest to Europe. 

Josh Young, the chief investment officer and founder of Bison Interests, stated that oil prices are expected to rise somewhat due to the exclusion of certain Russian oil from the market, but said the trend will ultimately benefit the U.S. economy because of its positive effects on the domestic industry.

Young said there has been a “weird misconception” among Trump economic advisors that higher oil prices are bad for the U.S. economy. He noted that since the U.S. exports more oil than it uses, a higher oil price is reasonable for domestic producers. Last month, the U.S. hit its lowest levels of crude oil exports in nearly four years. 

“If the price were to rise, it would actually be good for the U.S. economy, not just for oil companies, but broadly for the U.S. economy,” Young said.

He added that he believes India can easily stop importing Russian oil. Young said that it would not hurt their overall economy but rather would hurt specific industries and businesses that are earning extra profit because of the war. 

“I don’t know why we should want India to profiteer off of Russia’s invasion of Ukraine. Like that’s just a weird thing to sustain. And I think we have the power to stop it,” Young said.

Mukesh Sahdev, senior vice president and global head of commodity markets at Rystad Energy, told the Washington Examiner that India is buying oil in the international market by following all rules and regulations. 

“If India did not buy the oil, then the oil prices would have gone very high and we would have a recession,” Sahdev said. He added that the EU is buying the products made from Russian oil, so it’s a “convoluted moral argument.” 

The EU still relies on Russian energy, but its reliance on oil has droppedImports of Russian crude oil fell from 27% in 2021 to 3% of total EU crude oil imports in 2024.

Sahdec said that if the U.S. wants to end the war, it needs to offer relief options to India, suggesting that the U.S. might need to permit Iran to sell oil to India to provide some relief.

“If your goal is to stop the war, which is a noble goal, which is a good goal, and I would say, as an Indian, India should participate and help it,” Sahdev said. “But then provide options to them and release and enable via OPEC, via Iran, and the other players for a short time, and then achieve your goals.” 

Earlier this week, India called the U.S. actions “unfair, unjustified, and unreasonable.” It said it would “take all actions necessary to protect its national interests.” 

Trump plans to meet with Putin as soon as next week, as well as Ukrainian President Volodymyr Zelensky.