With a Friday deadlineforRussiato agree to peace in Ukraine or have its oil customers face secondarytariffs,Trumphas found a novel, but risky, use for his favorite trade tool.
The administration took a step toward punishing Moscow’s customers on Wednesday, imposing anadditional 25% tariff on goods from India over its imports ofRussian oil,marking thefirst financial penalty aimed atRussiainTrump’s second term.
No orderhas been signedfor China, the topRussian oil importer, but a White House officialsaid on Wednesdaysecondary measures thatTrumphas threatened against countries buying the petroleum were expected on Friday.
These are the latest in a string ofTrump’s tariff threats on non-tradeissues such as pressing Denmark to give the U.S.control of Greenland, attempting to stop fentanyl deliveries from Mexico and Canada, and penalizingBrazilover what he described as a “witch hunt”against former President Jair Bolsonaro.
While secondarytariffscould inflict pain on theRussian economy – severing a top source of funding forRussian President Vladimir Putin’s war effort –they also carrycosts forTrump.
Oil prices will likelyrise, creating political problems for him before next year’s U.S. midterm congressional elections. Thetariffswould also complicate the administration’s efforts to secure trade deals with China and India.
For his part, Putin has signaled thatRussiais prepared to weather any new economic hardship imposed by the U.S. and its allies.
There is “close to zero chance” Putin will agree to a ceasefire due toTrump’s threats oftariffsand sanctions onRussia, said Eugene Rumer, a former U.S. intelligence analyst forRussiawho directs the Carnegie Endowment for International Peace’sRussiaand Eurasia Program.
“Theoretically if you cut off Indian and Chinese purchases of oil that would be a very heavy blow to theRussian economy and to the war effort. But that isn’t going to happen,” he said, adding that the Chinese have signaled they will keep buyingRussia’s oil.
The White House did not immediately respond to a request for comment.
TheRussian embassy in Washington did not immediately respond.
Secondarytariffswould hurtRussia, the world’s second leading oil exporter. The West has pressuredRussiasince late 2022 with aprice capon its oil exports, intended toerodeRussia’sability to fund thewar. That cap has piled costs onRussiaas it forced it to reroute oil exports from Europe to India and China, which have been able to import huge amounts of it at discounted prices. But the cap also kept oil flowing to global markets.
In an early sign that Putin hopes to avoid thetariffs,the White House said thatPutin andTrumpcould meet as soon as next week, following a meeting between U.S. envoySteve Witkoff andtheRussian leaderon Wednesday.
But some analysts are skeptical that Moscow is ready to stop the war.
Brett Bruen, former foreign policy adviser for former President Barack Obama now head of the Global Situation Room consultancy, cautioned that Putin has found ways to evade sanctions and other economic penalties. And even iftariffsand sanctions cut intoRussia’s revenues, Putin is not under much domestic pressure.
Secondarytariffs, Bruen said, could start to cause some economic pain. “But the question is whether that really changes Putin’s behavior.”
Thetariffscould also create new problems for theTrumpadministration as it pursues sweeping trade deals, especially with India and China.
Kimberly Donovan, a former U.S. Treasury official, said thetariffscould hamper the U.S. bilateral and trade relationships with India and China.
“You’ve got two major oil importers that can kind of dig in their heels and push back, knowing what the U.S. needs out of them,” saidDonovan,now director of the Economic Statecraft Initiative in the Atlantic Council’s GeoEconomics Center.
China has demonstrated leverage over the U.S. by cutting off mineral exports and newtariffswould upset a delicate balance negotiated since May to restart those flows critical to a host of U.S. industries. India has leverage over generic pharmaceutical exports and precursor chemicals to the U.S.
Both countries say that oil purchases are a sovereign matter and contend that they are playing by the previous rules, namely the price cap onRussian crude.
Secondarytariffswould raise the cost of imports into the United States of products fromRussia’s customers, giving them an incentive to buy their oil elsewhere. Squeezing the shipments risks spiking fuel prices and inflation around the world that could pose political difficulties forTrump.
The month after Moscow’s February 2022 invasion, fears of disruptions fromRussiapushed international crude prices close to $130 per barrel, not far from their all-time high of $147. If India were to stop buying 1.7 million barrels per day ofRussian crude, about 2% of global supply, world prices would jump from the current $66, analysts said.
JP Morgan analysts said this month it was “impossible” to sanctionRussian oil without triggering a price jump. Any perceived disruptions toRussian shipments could propel Brent oil prices into the $80s or higher. DespiteTrump’s statements that U.S. producers would step in, it would be unable to quickly ramp up, they said.
Russiacouldretaliate,including closingtheCPC Pipelinefrom Kazakhstan, which could create a global supply crisis.
Western oil firms Exxon, Chevron,Shell,ENIand TotalEnergiesship up to 1 million barrels per day via CPC, which has total capacity of 1.7 million bpd.
Cullen Hendrix, senior fellow at the Peterson Institute for International Economics, said energy shocks are never welcome, especially not amidst a softening housing market and weak job growth. A key question is whetherTrumpcan frame any economic pain as necessary to forceRussiato negotiate.
“Of all his tariff gambits, this is the one that could resonate best with voters, at least in principle,” said Hendrix. “It’s also one with massive downside risks.”
(Reporting by David Lawder, Matt Spetalnick, Jonathan Landay, Timothy Gardner and Patricia Zengerle in Washington and Seher Dareen in London; writing by Timothy Gardner; editing by Don Durfee and Diane Craft)
