Oil tumbles over 2% as Trump's sweeping tariffs expected to weigh on demand

Trump imposed a 10 percent baseline tariff on all imports to the United States and higher duties of 26 percent on India and 34 percent on China.  

Crude oil prices fell over 2 percent on April 3, hours after US President Donald Trump announced “kind” and “discounted” reciprocal tariff on major oil consumers, including India and China.

Experts warn Trump’s higher-than-expected tariffs, which have already evoked strong reactions, could spark a global trade war that will hit growth and lower demand for crude.

At 7.55 am, the benchmark Brent was trading at $73.13 a barrel, 2.43 percent (or $1.82)  lower than the previous day’s close.

“Oil prices fall as fears of a demand slowdown and a global recession ramped up in the face of sweeping trade tariffs from US,” Harshraj Aggarwal, executive vice president, Yes Securities, said.

China has been the worst hit by Trump’s tariffs, with the US now levying a 54 percent duty on Chinese imports. “This duty raised concerns over more economic headwinds for the world’s biggest oil importer, which is already struggling to shore up growth,” Aggarwal said.

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The focus would be on an OPEC+ meeting later in the day, where the member countries are expected to outline plans to increase production, he added.

The Organisation of Petroleum Exporting Countries and allies are to virtually meet later in the day to discuss the group's oil production plan for the rest of the year.

Trump imposed a 10 percent baseline tariff on all imports to the United States and higher duties of 26 percent on India and 34 percent on China.

Higher tariff on big oil consumers including China and India would create panic in an already low demand global market.

China is the second-largest oil consuming market and the biggest oil importing country, while India is the third-largest oil importer.

Unveiling new tariffs, Trump said reciprocal tariffs would be very “kind” compared to what other nations charge the US.

He added that India is "very, very tough" when it comes to tariffs.
"PM Modi he just left, he's a great friend of mine, but I said you're a friend of mine, but you're not treating us right. They charge us 52%," Trump said, referring to the Prime Minister's recent visit to US.

Impact on India

India is a net-importer of crude oil, with over 85 percent of its crude requirements met through imports.

Elevated oil prices would result in higher import bill for the country.

Besides the reciprocal tariff, Trump’s threat of secondary sanctions on Russian oil also looms on the Indian economy.

Trump recently threatened to levy secondary sanctions on Russian oil buyers if Moscow failed to end the war with Ukraine.

Experts told Moneycontrol that the removal of Russian crude oil from the global energy market could have serious repercussions for the global economy.

India’s strategy of diversifying sources could help the country in navigating the situation if Trump goes through with the decision.