The US will not impose tariffs on Chinese goods related to Russian oil unless Europe takes similar actions. Scott Bessent from the US Treasury urges European governments to help reduce Moscow’s energy revenues, criticising both direct imports of Russian crude and purchases of Indian refined products.
The US has already imposed 25% tariffs on Indian goods, and President Trump is urging Europe to impose 50-100% duties on China and India. Bessent believes coordinated secondary tariffs could stop the war in “60 or 90 days” by cutting off Russia’s main revenue stream.
Tougher Sanctions on Russian Oil Majors
In addition to tariffs, the US is considering tougher sanctions on Russian oil majors. This includes exploring ways to utilise frozen Russian assets, specifically by moving part of the $300 billion held abroad into a special-purpose vehicle to support loans for Ukraine.
Despite Bessent’s remarks emphasising differing policies, Washington is urging Europe to implement harsher tariffs on China and India. The US stance restrains immediate trade escalation, but concerns remain about potential tariff risks and stricter sanctions that could impact energy and commodity markets.
The news today places a question mark over market stability, as Washington is linking its actions on China to Europe’s willingness to impose tariffs. This creates a conditional threat, which means we should prepare for a spike in volatility across asset classes. We saw back in the early days of the conflict in 2022 how the VIX index surged over 30 on geopolitical news, and a similar reaction is likely if Europe signals it might act.
Impact on Energy and Commodity Markets
For oil traders, the immediate focus is on the upside risk to crude prices, as any coordinated action would directly target Russia’s main revenue stream. Call options on Brent or WTI futures for the coming months could be a primary strategy to capture potential price spikes. Since India and China became the top buyers of Russian seaborne crude after 2022, absorbing over 80% of its exports by some measures last year, any tariffs would significantly disrupt global energy flows.
This uncertainty will likely weigh on specific equity markets, especially in Europe, which is being pressured into a difficult economic decision. We believe buying put options on major European indices like the DAX or Euro Stoxx 50 offers a good hedge against a potential downturn. We remember how the trade disputes of the late 2010s created sustained pressure on global indices, and this situation feels similar.
In the currency markets, this geopolitical tension reinforces the U.S. dollar’s role as a primary safe-haven asset. The euro is particularly vulnerable given Europe’s position at the center of this diplomatic push. A strategy of going long the U.S. Dollar Index (DXY) via futures or options seems prudent, mirroring the dollar’s rally in 2022 when global risk aversion was high.
