On Tuesday, August 5, US President Trump stated that tariffs on India could increase to over 25% within the next 24 hours. Investors are closely monitoring the reactions between the US and India.
President Trump, during an interview with financial TV station CNBC on Tuesday, said, “India has not been a good trade partner…so we settled on 25% (tariff rate), but I think I will significantly raise this threshold within the next 24 hours because they are buying Russian oil to fuel the war machine, and I’m not happy about that.”
Trump’s reference to the war machine is in regards to Russia’s invasion of Ukraine.
He also mentioned that if energy prices are low enough, the war in Ukraine by Russia would come to an end.
On Monday, Trump accused India of buying Russian oil at discounted prices and “reselling on the open market for massive profits”. He threatened to “greatly increase” tariffs on India, although he did not specify the level of duties.
Last week, Trump had threatened a 25% tariff on Indian exports and imposed unspecified “penalties”.
Western countries use sanctions and import restrictions to curb Russia’s oil export revenue, which funds its ongoing war in Ukraine. However, some of Russia’s trading partners, particularly India and China, continue to purchase Russian crude at discounted rates, relying heavily on these imports.
Trump is committed to ending the Russia-Ukraine conflict as soon as possible. He has set a deadline for Russia to cease fire within ten days (by August 8), or face secondary sanctions on Russian oil.
Later on Monday, the Indian Ministry of External Affairs retaliated against Trump’s remarks, stating that India importing Russian oil is a necessary choice in the global market situation, and in turn mentioned that Europe and the US also engage in trade with Russia.
The Indian Ministry of External Affairs deemed the actions against India as “neither reasonable nor fair” and vowed to take all necessary measures to safeguard national interests and economic security.
Since the Russian invasion of Ukraine in 2022, trade relations between India and Russia have continued to develop. According to recent data from the US Energy Information Administration, Russia has become India’s primary oil supplier following the outbreak of the Russia-Ukraine conflict, with daily imports rising from less than 100,000 barrels before the invasion (2.5% of India’s total imports) to over 1.8 million barrels per day in 2023 (39% of India’s total imports).
International oil prices have been on a three-day decline, with investors weighing Trump’s statements and actions on whether they will impact the energy price trends in the international market.
After Brent crude prices fell over 6% in the past three trading days, it is currently trading below $68 per barrel, while West Texas Intermediate crude prices are close to $65 per barrel.
Oil prices have experienced fluctuations, briefly surpassing $70 before dropping back, as traders assess whether Trump will follow through with his threat of punishing Russian oil buyers. Oil prices remained firm in recent months, partly due to China’s increased crude reserves not being sufficient to impact international market pricing.
According to reports from TASS, US envoy Steve Witkoff is expected to visit Moscow on Wednesday.
Bloomberg reported at noon on Tuesday, citing sources, that Russia is weighing options to make concessions to Trump, including potentially reaching an aerial ceasefire agreement with Ukraine to avoid facing sanctions again. However, this does not necessarily mean Russia genuinely seeks a ceasefire.
During an interview with Bloomberg TV on Tuesday, Murray Auchincloss, CEO of a British oil company, expressed difficulty in predicting how US sanctions on Russia, Iran, China’s inventory increases, and fundamental factors of the oil market will affect future trends as these have traditionally been factors pushing oil prices higher.