Global Oil Supply at Risk as Trump's Tariffs Target India

The global oil market is facing new uncertainty following President Donald Trump's executive order to impose an additional 25% tariff on Indian imports. This new duty, which comes on top of an existing 25% tariff, brings the total to a substantial 50%, one of the highest rates the US has imposed. The move is a penalty for India's continued purchases of Russian oil, which the US views as "fueling the war machine." India has since become the largest buyer of Russian crude, importing around 2 million barrels per day, which accounts for more than 35% of its oil imports and around two percent of global supply.

The financial world is concerned about the potential ramifications. J.P. Morgan analysts have warned that Russia might respond by halting the Caspian Pipeline Consortium, which exports approximately 1 million barrels of crude daily. BNP Paribas analysts estimate that if India's purchases of Russian oil are cut off and the Caspian Pipeline is shut down, it could disrupt a combined 3.5 million bpd of oil flow. This disruption could potentially cause oil prices to spike above $80 per barrel.

India's government has called the tariffs "unfair, unjustified, and unreasonable," noting that other countries, including China and Turkey, also import Russian oil but have not faced similar penalties. The tariff increase is set to take effect 21 days after the announcement, leaving a window for diplomatic negotiations.

The dispute highlights the broader geopolitical tensions surrounding the Russia-Ukraine conflict and international trade. While Trump has positioned himself as a "peacemaker," he has also grown increasingly frustrated with the lack of a ceasefire. The tariff on India is a clear signal of his willingness to use economic pressure against countries he believes are undermining US foreign policy.