President Donald Trump has imposed an additional 25 per cent tariff on India after the country’s government imported Russian Federation Oil.

In an executive order signed on Wednesday, the White House said it would slap Indian imports with the fresh levy taking their overall rate to 50 per cent.

The President warned on Tuesday he would raise India’s tariff rate “very substantially over the next 24 hours, because they’re buying Russian oil, they’re fuelling the war machine”.

“If they’re going to do that, I’m not going to be happy,” Trump said.

This follows a major warning that secondary tariffs on countries that buy oil from Russia would tip Russia over into a recession and risk a global energy crisis.

New research by Oxford Economics has indicated that Russia’s economy could face a damaging recession if secondary 100 per cent tariffs are imposed on its trading partners. 

Analysts at the leading consultancy suggested central bankers in Moscow would have “hardly any room” to cut rates, which could help to prevent the Russian economy from plunging into a recession. 

Trump’s envoy Steve Witkoff met with Putin on Wednesday afternoon in the Kremlin ahead of a deadline for Russia to agree a ceasefire with Ukraine. 

Russia on the brink

Trump has warned that the US would impose secondary tariffs if Putin continued with his war in Ukraine. 

Ukrainian President Volodymyr Zelensky has warned that the Russian leader would only consider peace if he had run out of money to fund the Russian military. 

The Russian economy is “teetering on the brink of recession” after its economy unexpectedly contracted by 0.6 per cent in the first quarter of the year, said Tatiana Orlova, emerging markets economist at Oxford Economics. 

Economists said Trump’s secondary tariffs could lead to a big drop in Russian oil exports, making the Russian ruble weaker and leaving the Central Bank of Russia (CBR) exposed. 

The CBR may need to lower interest rates further from its current rate of 18 per cent, which was lower than the 21 per cent rate seen at the beginning of the year, for the spending in the economy and lending trends to rebound. 

But tariffs on Russia’s trading partners could scupper hopes of a recovery. 

“The CBR has much less room for shoring up the foreign exchange market with rate hikes,” said Tatiana Orlova, emerging markets economist at Oxford Economics. 

“However, we expect the sell-off to be more modest than in 2022. The population and businesses learned the lesson then as the foreign exchange rate spike was short-lived and won’t run on the rouble.”

Orlova said Russian finances were now “more vulnerable” as its sovereign fund has been used to fund its full-scale invasion of Ukraine. 

“If Russia’s earnings from exports of oil and other commodities are hit with more ‘biting’ sanctions, it will be left with hardly any room for fiscal stimulus to support flagging growth.”

Gas price risk to the UK

Forecasters have said the prospect of Trump’s threats could make oil prices surge as much as $100 a barrel from a current price of around $67.

A separate report by Capital Economics suggested secondary tariffs would lead to “higher global energy prices”, with natural gas prices to be hit more than oil. 

“Prices are still high relative to before Russia’s invasion of Ukraine. In other words, there is currently little to no room to absorb an even further loss of Russian supply,” said Kieran Tompkins, senior climate and commodities economist at Capital Economics. 

“The impending wave of additional global liquefied natural gas supply, which is set to increase by 30 per cent by the end of 2027, may arrive too late.”

The results could be especially damaging for European economies including the UK, which remain highly dependent on gas. 

Natural gas provided over a quarter of the UK’s total energy consumption in the year to April, according to recent National Grid data. 

Trump’s diplomacy in the spotlight

Oxford Economics’ base case assumes China and India will be pressured into buying US energy exports in a similar deal struck by the EU ahead of a “reciprocal” tariffs deadline last week. 

But threats could push the major economies to take a more active approach in the Russia-Ukraine war by encouraging Putin to engage in ceasefire negotiations. 

In the case Russia agreed to a ceasefire with Ukraine, Putin could negotiate the removal of some US sanctions. 

Trump has appeared to build closer ties with Zelensky in recent weeks, agreeing to sell $200m in military equipment to Ukraine on Tuesday. 

He also sent two nuclear submarines to move closer to Russia in response to “highly provocative” comments made by former Russian President Dmitry Medvedev, who had accused Trump of “playing the ultimatum game”. 

The US president’s military move was played down by Kremlin spokesperson Dmitry Peskov.

By City AM 

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