How Trump’s secondary prices ” secondary prices could hit the world economy

Despite being the most sanctioned country in the world, Russia has continued to use its vast energy wealth to finance its war in Ukraine.

US President Donald Trump hopes to change this. He announced that the scanning of new secondary prices will have an impact on any country that always exchanges with Russia if a cease-fire with Ukraine has not agreed by Friday, August 8.

Secondary prices would see the goods from any country that is negotiated with Russia is confronted with a 100% tax when imported in the United States.

Oil and gas are the largest exports in Russia, and the largest Moscow customers include China, India and Turkey.

“I used the trade for many things, but it’s great to settle wars,” said Trump last month.

It would not be the first time that the Trump administration has required secondary prices, which are also in place to punish Venezuelan oil buyers.

However, using them against Russia would have much greater implications for the world economy.

Russia remains the third largest oil producer in the world, behind only Saudi Arabia and the United States itself. But his shipments have dropped this year, according to a Bloomberg analysis of ship’s monitoring data.

“The key channel by which the secondary prices on Russian energy buyers could have an impact on the world economy would be made by the level of energy prices”, explains Kieran Tompkins of the Capital Economics consultation.

If the prices work, they will reduce the flow of Russian oil and gas to the world markets.

And with less offer, prices could increase, just as they did when Russia launched its large -scale invasion of Ukraine in 2022. This led to a peak in the world. President Trump says he is not worried due to record production of the United States.

Mr. Tompkins stresses that this time there are also other reasons to suggest that the impact on prices would not be as marked.

He explains that “the current backdrop is that where OPEC + (the group of the main oil producing countries and its allies) has a significant spare capacity to rely”.

Russia has designed a complete system to avoid existing sanctions, which could be useful to help its business partners avoid secondary prices threatened by Trump.

For example, its so -called “shadow fleet” – made up of hundreds of oil tankers with dark property – could be used to hide the origin of exported Russian oil and gas.

“Sanctions maintenance is as important as the taxation of sanctions in the first place,” said US sanctions expert Richard Neveu from Columbia University.

“It is because the party that is sanctioned takes action to escape them.”

Since the large -scale invasion of Ukraine in 2022, India has been the second largest Russian oil buyer, according to the Center for Research on Energy and Clean Air.

“They feed the war machine. And if they are going to do it, then I will not be happy,” said President Trump told us on Tuesday CNBC.

If secondary sanctions come into force, American companies that buy India goods will have to pay a 100% import tax – or a price – when these products reach the American coasts.

The idea is that it makes these goods so expensive that American companies will choose to buy them cheaper elsewhere, which leads to lost income for India.

This, in turn, is supposed to dissuade India from buying Russian oil. And if Russia is not able to sell its oil elsewhere because other countries are faced with the same situation, it will have less money to finance the war in Ukraine.

A way in which Americans could undergo higher prices due to new secondary rates concern their purchase of mobile phones in India.

The American company Apple moves a large part of its iPhone production in India – in particular the manufacture of handsets that it wants to sell in the United States.

If these products are subject to new prices, prices could double for American consumers. Indeed, the prices are paid by companies which import goods – and these companies tend to pass most, if not all, from their cost increases to their customers.

Imports to the United States from India are already faced at a rate of 25% as part of President Trump’s broader upheaval, and he told CNBC that the number could be increased “very substantially”.

The Indian government has accused the United States of standard states, pointing to Washington’s continuous trade with Russia.

The vast majority of this trade is made up of American imports from India, which represents just over $ 3 billion (2.2 billion pounds sterling) last year – although it only represents 10% of the 2021 levels.

This trade is dominated by American purchases of raw materials for nuclear energy and fertilizers. Russia is a large world supplier of both.

China buys the most Russian oil, and a decision by President Trump to impose secondary prices on Chinese products would be much more difficult to achieve.

Indeed, American imports from China are worth five times more than those of India, and many more of these imports are consumer goods such as toys, clothing and electronics.

Secondary prices aimed at Beijing would also risk upsetting a much broader renegotiation of trade between the two largest world economies that Trump has been pursuing since his first mandate.

“This type of overexcursion is unlikely to impress the Chinese,” said professor of commercial experts Simon Aisett from the IMD Business School.

He explains that it would be “very difficult” to take off the Chinese of the Russians without a good reason, given the way in which Presidents XI and Putin have worked closely in recent years.

In addition to that, the last time Trump tried to use three -digit prices against China, he found that it did not work – because he almost cut all the trade between the two countries.

Another decision like this could add to inflationary pressures in the United States, which Trump has long been committed to tackling.

This could also cost huge amounts of manufacturing jobs in China, at a time when its economy is already in difficulty on several fronts.

Analysis by the Center for Research and Clean Air based in Finland shows that the EU and Turkey are also among the largest Russian energy buyers.

Before 2022, the EU was the number one export destination for Russia, although this has been largely reduced since the large -scale invasion of Ukraine. Brussels recently agreed to buy much more energy in the United States, but some imports from Russia remain.

In June, the president of the European Commission, Ursula von der Leyen, acknowledged the problem, saying that “Russia has tried repeatedly to make us sing by stopping its energy supplies” when it provided plans to end imports by the end of 2027.

The US trade relationship is the largest in the world, and the pair has just negotiated new commercial terms Who will see a rate of 15% be applied to most EU exports to the United States.

Many in the EU criticized this agreement, saying that the prices would harm European exporters.

Now they also fear that secondary sanctions against the EU can do even more harm. Adding 100% prices for the purchase of Russian energy could considerably reduce the amount of goods sold by the EU in the United States.

However, the biggest sellers include pharmaceutical products and machines, which can be difficult to find elsewhere – which means that Americans have no choice but to pay more.

Until now, Russia’s own economy has proven to be remarkably resilient since the start of the large -scale invasion of Ukraine, increasing 4.3% last year.

However, the Minister of the Economy Maxim Reshetnikov recently warned that the country was “on the verge” of the recession after a period of “overheating”. The International Monetary Fund (IMF) is planning to grow only 0.9% this year.

If secondary sanctions succeed in reducing export demand, they will bring Russia closer to the recession.

The exact impact of the war on the economy of Russia is difficult to know, because Moscow has prevented a large quantity of economic data from the publication on a large scale – including on the production of oil and gas.

About a third of Russian public spending are funded by oil and gas money, but exports have dropped.

Meanwhile, Putin has led a larger share of defense expenses at any time since the Cold War. Defense expenses would have reached 6.3% of GDP.

On the other hand, Ukraine spent 26% of the value of its much more solutive economy in the war. The difference explains why its president, Volodymyr Zelensky, has repeatedly asked for the external aid of his allies.

Trump’s prices are intended to help Zelensky by reducing the amount of money in Russia, and he hopes to end death, suffering and destruction in Ukraine.