The United States has urged its G7 and European Union allies to consider tariffs on China and India over their continued purchases of Russian oil, which Washington says are helping fund Moscow’s war in Ukraine.
The proposal, discussed during a recent G7 finance ministers’ call, saw U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer advocate for tougher measures, including using frozen Russian assets to support Ukraine’s defense.
Washington has already imposed a 50% tariff on certain Indian imports linked to Russian oil, a move that former President Donald Trump described as a “big deal,” straining relations with New Delhi. Similar measures have not been applied to China, in part due to ongoing trade negotiations.
The U.S. has proposed that G7 members consider secondary tariffs of up to 100% on Chinese and Indian goods to pressure them into ending purchases of Russian crude. European G7 members, while supportive of strong measures against Moscow, have expressed caution, citing potential economic fallout and retaliation from China.
The threat of tariffs comes as global oil markets continue to navigate a mix of supply risks and demand uncertainties. Brent crude futures rose 0.9% on Friday to settle at $67 a barrel, marking a 2.3% gain for the week, as concerns over Russian crude supply outweighed worries about oversupply and weaker U.S. demand.
Market sentiment was lifted after the Kremlin announced a pause in peace talks with Ukraine, raising the risk of further Western sanctions, and following a drone attack on Russia’s Primorsk port that temporarily halted oil loading operations.
Earlier losses on Thursday came after the International Energy Agency (IEA) projected faster-than-expected global oil supply growth, driven by OPEC+ output increases and Saudi Arabia’s plans to boost shipments to China.
In the United States, rising consumer prices and higher jobless claims have fueled expectations of a potential Federal Reserve rate cut, which could support oil demand. At the same time, U.S. crude inventories rose by 3.9 million barrels last week, underscoring ongoing concerns over market balance.
If the proposed U.S. tariffs are enacted, China and India, the largest buyers of Russian crude since Western sanctions restricted Moscow’s access to Europe, could face disruptions in supply, potentially tightening global markets further. The uncertainty alone may inject a risk premium into oil futures, amplifying volatility in an already complex market.
For oil-importing countries, the potential measures could pose additional challenges. Nations heavily reliant on imported crude, particularly in Asia and Europe, could see costs rise and supplies tighten if secondary tariffs are implemented.
Even the prospect of such measures could prompt stockpiling, contract adjustments, or re-routing of shipments, temporarily lifting prices. Higher energy costs could also feed into inflation, affecting transportation, manufacturing, and households.
It is important to note that these tariffs remain under discussion. European allies have voiced caution, leaving both the scope and likelihood of implementation uncertain.
