Tariff Impact On Oil Prices: Escalating his tariff war against India, US President Donald Trump on Wednesday (Aug 6) slapped an additional 25 per cent
duty--doubling it to 50 per cent--on Indian goods over New Delhi's continued imports of Russian oil.
While the initial 25 per cent duty becomes effective on August 7, the additional levy will come into effect after 21 days or August 27.
Commenting on how tariffs could impact oil prices for India, noted economist and ET NOW's Consulting Editor, Swaminathan Aiyar, said that oil will cross $100/bbl if New Delhi doesn't buy Russian oil. He said that India no leverage and that Trump's bargaining position is very strong.
He said that Trump's aim is to draw money from the rest of the world, adding that "2026 will not be a good year for the US".
"I would say that this particular situation was not thought to be the key stumbling block. The notion was that this is reciprocal tariffs issue and the Russian oil thing... others were buying it too. But I think we have now come to a stage where our buying of Russian oil is so large. It is crucial to the economy. The truth is that if we really stop buying Russian oil altogether and if we then buy it only from the Gulf and other sources, the price of crude oil will exceed $100 per barrel in no time," he said.
"In other words, there will be a 50% increase in the price of oil if you don't buy Russian oil. I mean, I don't think they will be able to sell it to other people so easily and so smoothly as we have been doing. So, this is a separate issue from the reciprocal tariffs issue," he said.
The reciprocal tariffs, he said, "in some sense we were trying to manage". "I think nobody was quite sure how seriously he (Trump) would take this because at one point of time he looked quite friendly with Putin. So this huge change has caught us on the wrong foot".
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"There is no question of being soft good. As far as I can see we have to buy Russian oil. If we do not buy Russian oil, the price of oil will shoot up," the noted economist said. "I would say that it would be wrong for India to knuckle in and say okay we will try to find oil from other sellers".
On what should India do at this point, Aiyer said, "I would say let them put tariffs on us. We should be very firm and say look as far as we are concerned when you announced the sanctions, did you consult us? You on your own decided to put sanctions... I think we should be very firm that the way the sanctions you were put, were unacceptable to us. We therefore found another way around of buying the Russian oil by various other means. But at this point of time, it is inescapable. There is no question of our 100% giving up on Russian oil. The blow to us would be bad and the blow to the rest of the world including the United States will also go up."
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