News analysis China, India may bear brunt of 'secondary tariffs' against Russia

China and India stand to bear the brunt of US President Donald Trump's threat of 100 per cent "secondary tariffs" on nations trading with Moscow, should Russian President Vladimir Putin fail to negotiate a ceasefire in Ukraine in less than 50 days.

- Rohini Mohan

BENGALURU/BEIJING -

As the two largest purchasers of Russian oil following Western sanctions on Russia for invading Ukraine in early 2022, Beijing and New Delhi receive the bulk of the estimated more than seven million barrels of crude oil and refined products that Moscow exports each day.

Mr Trump's threat could drastically escalate the economic war against Russia, whose invasion of Ukraine is now into its fourth year. Higher global energy prices would invariably also follow, but, with oil prices dropping by just over 1 per cent after his July 14 announcement, the markets appear sceptical that Mr Trump would commit to a move that would increase fuel prices for Americans.

"Secondary tariffs are far more complex for global oil markets than they seem. Unlike plain old sanctions that punish the source country, tariffs drag in and punish buyer countries too," said Ms Vandana Hari, founder of Singapore-based Vanda Insights, a consultancy that covers global oil markets.

"It is a credible threat to Russia, but it is unlikely that Trump will go ahead with it, because of the supply shock and price spike it can lead to globally."

While China on July 15 denounced Mr Trump's threat as "coercive" and Russia labelled it a "theatrical ultimatum", India is keeping its cards close to its chest as it negotiates trade tariffs in the US.

In a sharp escalation of Washington's rhetoric, US Senators Lindsey Graham and Richard Blumenthal subsequently called for tariffs as high as 500 per cent on countries, including India and China, that continue to do business with Russia if it keeps up its invasion of Ukraine.

If President Trump follows through with this latest tariff threat against Russia and its trading partners, the move could drastically change the oil market.