US President Donald Trump has announced a secondary or additional tariff on India for its crude oil trade with Russia. During his second presidential term, Donald Trump has wielded tariffs extensively to achieve various objectives: from enhancing domestic production and securing foreign market entry to raising federal income, and even retaliating against Brazil’s prosecution of his political associate, former President Jair Bolsonaro. On August 6, Trump declared the implementation of a ‘secondary tariff’ on Indian imports to the US, scheduled to be effective in 21 days, that is August 27 onwards. The measure imposes an extra 25% duty on Indian goods, supplementing the existing 25% tariff, specifically to penalise India’s oil purchases from Russia.
What are Trump’s secondary tariffs ?
Trump’s latest initiative introduces what he terms a “secondary tariff”, aimed at pressuring countries to sever ties with US opponents – in this case Russia.The fundamental principle of “secondary tariffs” involves using trade penalties against one country to exert pressure or influence upon another country. This approach shares similarities with secondary sanctions mechanisms, according to a Bloomberg report.Also Read | ‘Extremely unfortunate’: India reacts strongly to Donald Trump’s 25% additional tariff for buying Russian oil; ‘will take all actions necessary…’
How are secondary tariffs different from secondary sanctions?
- Secondary sanctions basically serve as a US policy tool to enhance the impact of primary sanctions imposed on specific entities or nations.
- These sanctions specifically address business activities with sanctioned parties that occur beyond US jurisdictional boundaries.
- The objective is to present organisations, financial institutions and persons with a decisive choice: either maintain business relations with the sanctioned entity or continue operations with the US, as both options cannot coexist.
- Secondary sanctions derive their effectiveness from the dominant position of the US financial system in global economics and the dollar’s status as the international reserve currency, rather than through direct asset seizures or fines like primary sanctions.
- Entities breaching secondary sanctions risk facing US export restrictions or inclusion in the Treasury Department’s Specially Designated Nationals and Blocked Persons List, effectively barring them from American business dealings.
Secondary tariffs differ from secondary sanctions – the additional 25% duty Trump announced on Indian imports is not designed to enhance an existing primary tariff, despite what its name might indicate, the Bloomberg report said.Whilst US tariffs on Russian energy became redundant following the 2022 ban after Russia’s war with Ukraine, this new levy on Indian goods appears intended to pressure India’s government to implement a comparable ban, ultimately aiming to influence Russia to cease its military operations.Also Read | Donald Trump hits India with highest 50% tariff for Russia crude oil buys – how will it impact Indian economy? ExplainedIn March, Trump announced a system to levy tariffs on imports from nations purchasing Venezuelan oil, which he claimed endangers US national security.And how does the US track which countries are buying oil from Russia? Maritime vessels are equipped with tracking transponders that broadcast their positions continuously. These signals can be monitored via satellite in real time.This technology enables both governmental and private analysts to observe oil tankers’ movements, such as tracking vessels from their loading points in Russia to their discharge locations in India.India sources around 88% of its crude oil needs from global markets, which is then refined into various fuels including petrol and diesel. Before 2021, Russian crude made up just 0.2% of India’s total oil imports. After the Russia-Ukraine conflict began, Indian refineries capitalised on Russian oil offerings at reduced prices, which were available at competitive rates due to western-imposed sanctions. At present, Russia has become India’s leading supplier of crude oil.
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