President Trump plans to add a 25% tariff on goods imported from India. This move is aimed at punishing India for buying Russian oil despite pressure from the U.S. The tariff comes as new sanctions against Russia are expected. The goal is to create economic pressure on Moscow to help end the conflict in Ukraine.

Trump’s Trade Strategy

Trump’s trade plan focuses on bringing more goods to the U.S. and increasing oil exports to India. This could lessen India’s reliance on Russian energy and enhance American trade. If implemented, the new tariff will raise the total tariff rate to about 50%, starting August 27. Following this announcement, crude oil prices have risen. Previously, prices had dipped close to the 100-day moving average of $64.96. Today’s low was $65.11, leading to a bounce in the market. The current market price is $65.68. Sellers need to break below the 100-day average to aim for prices of $64.71 and $63.61. The resistance level is about $66.97, with the 200-day average at $67.89.

Tariff Deadline and Effects

Oil inventory estimates are pending: Crude oil at -0.591M, Gasoline at -0.406M, and Distillates at +0.775M. August 27 is the critical date for the new 25% tariff on India. Crude oil prices are reacting to this geopolitical risk, while the market is at a vital technical level. If prices stay below the 100-day moving average at $64.96, it might indicate sellers are gaining control despite the news. Due to this uncertainty, traders might want to use options to manage their risk. Strategies such as buying call spreads to aim for resistance around $66.97 or put spreads if the market drops below key support can be effective. This approach allows traders to participate with limited downside before the tariff deadline clarifies market trends. The potential biggest impact could be on the Indian Rupee and the Nifty 50 index. The U.S. is India’s main trading partner, with trade exceeding $130 billion in 2024. A possible 50% total tariff poses a threat to this relationship, making trades that bet against the Rupee and the Nifty 50 appealing. This action reflects a clear trend from the past year. After the Ukraine invasion, Indian imports of Russian seaborne crude spiked, with recent data showing volumes often surpassing 1.9 million barrels per day. Washington’s decision is a direct response to these ongoing purchases, making this a significant trade issue. We should expect increased market volatility. Looking back at the U.S.-China trade war from 2018 to 2020, there were sharp spikes in the VIX. This new trade conflict brings similar uncertainty, making long volatility positions via VIX futures or options a valuable hedge. In the short term, all attention is on the EIA inventory data set to be released today, August 6th. A draw in crude oil inventories could temporarily support prices. Conversely, a surprise build could push prices below the crucial 100-day moving average, shifting momentum downward. Create your live VT Markets account and start trading now.

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